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The IUP Journal of Applied Finance

Impact of Institutional Investors on Indian Stock Market Performance

Article Details

Pub. Date	: Oct, 2022
Product Name	: The IUP Journal of Applied Finance
Product Type	: Article
Product Code	: IJAF011022
Author Name	: Aashish Jain
Availability	: YES
Subject/Domain	: Finance
Download Format	: PDF Format
No. of Pages	: 25

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Abstract

The paper analyzes the impact of Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs), as these are the two primary institutions on which the Indian stock market is dependent. The research design and statistical tools used in the study are: Vector Error Correction Model (VECM), Granger Causality, Variance Decomposition Analysis, and Impulse Response Function. During the Covid-19 pandemic, high volatility was witnessed in the global markets, so it is important to evaluate the behavior of the Indian stock market with respect to the inflows and outflows of institutional investors on a daily basis. The paper concludes that Indian stock market return (Nifty 50) has more significant impact on FIIs, as compared to DIIs (mutual funds).

Introduction

India is one of the fastest growing developing countries, where foreign and domestic investors seek to build their portfolios to get the maximum returns. In any economy, it is a challenge to allocate savings according to the availability of investment opportunities. All the countries expect to get a sufficient number of inflows to exploit new business ideas, generate employment, and grow the economy at a rapid pace. The foreign investors, on the other hand, seek to invest in an economy where the growth potential is high. Every country knows the importance of foreign investors as well as domestic investors.