Foreign institutional investors and investors in mutual fund are the major participants of Indian stock market. this study aims to investigate the factors influencing investment behaviour of FIIs and mutual fund investors. Various statistical tools were applied to check the effect of various factors such as regression and Granger’s Causality Test. This study reveals that return in stock market and exchange rate are major components influencing investment behaviour. Study revealed that causality direction is from investment by foreign Institutional investors to MFIs. The study suggested that strong economic policy must be formed to encourage domestic investors and to provide good platform for FIIs so they can invest their money with confidence. Some efforts also need to made for attracting FDIs.