The function of foreign direct investment (FDI) in the Indian stock market is critically analysed in the following paper. India's financial markets, especially the stock market, have been greatly affected by the FDI inflow, as the country's economy, which is among the fastest-growing in the world, continues to rise. The purpose of this study is to assess the effects of foreign direct investment (FDI) on the Indian stock market's efficiency, volatility, liquidity, and overall stability. Theoretical framework An outline of India's regulatory framework for foreign direct investment (FDI) and its historical patterns is given at the outset of the paper. The literature on the connection between foreign direct investment (FDI) and stock market performance is then reviewed, emphasizing the positive and negative effects that earlier research has found. The article also covers the methodologies used by researchers, such as econometric models and empirical analysis, to evaluate this link. The paper also looks at the ways that foreign direct investment (FDI) affects the Indian stock market, including technology transfer, strategic acquisitions, and portfolio investments. It investigates how deeper market penetration and higher trading volumes brought about by FDI inflows impact market liquidity. The study also looks into how foreign direct investment (FDI) affects stock market volatility, taking into account variables including political stability, regulatory changes, and global economic conditions. Furthermore, the critical appraisal explores how FDI affects market efficiency by examining its function in price discovery, market integration, and information dissemination. It assesses whether FDI improves the allocative efficiency of capital inside the Indian stock market and fosters increased market transparency. A critical assessment of the results, pointing out gaps in the current literature and suggesting directions for future research, closes the report. It emphasizes the necessity of all-encompassing regulatory measures to minimize possible threats to financial stability and investor trust in the Indian stock market while optimizing the advantages of FDI. In light of India's changing economic environment, this study adds to a more sophisticated understanding of the intricate relationship between FDI and stock market dynamics.