This paper attempts to examine the presence of herd behavior among the foreign institutional investors (FIIs) when investing in Indian stock market. We also examine the impact of herding in FIIs on stock returns using panel regression approach. We apply the measure suggested by Lakonishok et al. (J Financ Econ 32(1):23–43, 1992), hereafter referred as LSV, to detect the buy-side and the sell-side herding in the Indian stock market. In order to find out intertemporal trading pattern of FIIs, we also use SIAS model. This paper makes use of daily data of 50 stocks of S&P CNX Nifty to achieve the goals. The study also tries to develop a volume-based herding ratio to extend the findings. The results support the evidence of presence of both buy-side and sell-side herding in the Indian stock market. The results based on panel regression approach highlights the destabilizing effect of FIIs in the Indian stock market that may be an issue of concern for the regulators.