Foreign Institutional Investments in India: An Empirical Analysis of Dynamic Interactions with Stock Market Return and Volatility

Dhingra, Vaishali S.; Gandhi, Shailesh; Bulsara, Hemantkumar P.

doi:10.1016/j.iimb.2016.10.008

Cited by 4 publications

(4 citation statements)

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“…Further, it is noticed that foreign investors indulge in making the market returns deviate from their fundamental value by overreacting to the news/shocks/events (Chauhan and Chaklader, 2020;(Ananthanarayan et al, 8-9 June 2009;? ;Dhingra et al, 2016) Table 6 depicts that there exists an insignificant difference in the net investment pattern of DIIs in the pre-and postbudget periods. This indicates that only foreign investors significantly change their investment strategy in the short-term market after the announcement of the budget.…”

Section: Foreign Flows and Domestic Flowsmentioning

confidence: 99%

Interrelation between the Institutional Investors and the Union Budget in the Indian Stock Market

Gupta

Singh

Jain³

2022

RIJBR

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The key purpose of this study is to gauge the effect of yearly union budgets spanning from 2010 to 2021 by observing yields and volatility in the Indian bourse. Overall, 12 union budgets are considered in the Indian scenario. Further, the present work strives to relate the market returns with the investment activities adopted by foreign institutional investors (FII) and domestic institutional investors (DII). The event, i.e., the proclamation of the budget happens on February 1 every year, and therefore 60 trading days which are sub-divided into 30 days before the budget and 30 days after the budget has been analyzed in the study. Moreover, the event window of 60 days has been bifurcated into a period of pre-and post-3 days, pre-and post-15 days, and pre-and post-30 days around the budget. Paired samples T-statistic and F-test have been used in the current study. The results suggest that the medium-term returns are significantly influenced by union budgets. The volatility is greatest in the short-term period after the budget proclamation and it reduces with the increasing time. One startling thing to observe is that falling returns and rising volatility in the short-term period post-budget are due to the selling activities of foreign investors. It is recommended to hold the stocks in the post-budget short-term period irrespective of the falling returns till the long-term to book profits.

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Section: Foreign Flows and Domestic Flowsmentioning

confidence: 99%

Interrelation between the Institutional Investors and the Union Budget in the Indian Stock Market

Gupta

Singh

Jain³

2022

RIJBR

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“…Few studies have been conducted to empirically investigate the volatility relationship between DII and FII equity flows and Indian stock markets. Dhingra et al (2016) argued that FII investments tend to destabilize the Indian stock market with selling activities, which results in increased volatility. Joo and Mir (2014) found a significant impact of FII flows on the stock markets' volatility.…”

Section: Review Of Literaturementioning

confidence: 99%

Do Lower Foreign Flows and Higher Domestic Flows Reduce Indian Equity Market Volatility?

Aggarwal

Doifode²,

Tiwary

2021

Vision: The Journal of Business Perspective

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This study examines the relationship that both domestic and foreign institutional net equity flows have with the India stock markets. The motivation behind is the study to examine whether increased net equity investments from domestic institutional investors has reduced the influence of foreign equity flows on the Indian stock market volatility. Our results indicate that only during periods in which domestic equity inflows surpass foreign flows by a significant margin, as seen during 2015–2018, is the Indian stock market volatility not significantly influenced by foreign equity investments. However, during periods of re-emergence of strong foreign net inflows, the Indian market volatility is still being impacted significantly, as has been observed since 2019. Furthermore, we find that both large-scale net buying and net selling by domestic funds increased the stock market volatility as observed during 2015–2018 and COVID-impacted year 2020 respectively. The implications of this study are multi-fold. First, the regulators should discuss with industry bodies before enforcing major structural changes like reconstituting of mutual fund investment mandate in 2017 which forced domestic funds to quickly change portfolio allocation amongst large-cap, mid-cap and small-cap stocks resulting in higher stock market volatility. Second, adequate investor educational and awareness programmes need to be conducted regularly for retail investors to minimize herd behaviour of investing during market rise and heavy redemptions at times of fall. Third, the economic policies should be stable and forward-looking to ensure foreign investors remain attracted to the Indian stock markets at all times.

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“…Moreover, concentrated ownership is regarded as insiders with a high controlling stake, where they monitor the firm to maximize their benefits. Institutional investors as outsiders are referred to as efficient monitors and mostly their growing activism in the Indian capital market moves the stock prices (Dhingra et al, 2016). Hence, understanding of the causes behind concentrated ownership and institutional investments becomes necessary.…”

Section: Introductionmentioning

confidence: 99%

What matters to ownership structure? Evidence from pre- and post-global financial crisis in an emerging market

Panda

Kumar

2020

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PurposeThe purpose of this paper is to ascertain determining factors of ownership concentration and institutional portfolio ownership in the listed firms of an emerging market during pre-crisis and post-crisis periods and find variations in determining factors between the two varying market conditions.Design/methodology/approachThis paper considers 316 listed firms for the pre-crisis period and 408 firms for the post-crisis period, from the NIFTY-500. Pre-crisis period ranges from FY2000-01 to FY2007-08 and post-crisis period ranges from FY2009-10 to FY2016-17. Two-step GMM is utilized to test the hypotheses by controlling the unobserved heterogeneity and endogeneity issues.FindingsHigher investment and stock market growth leads to ownership dispersion in both the market conditions. Industry information asymmetry leads to dispersion in pre-crisis, while improves concentration in post-crisis phase. Firm size, legal environment and economic growth are found to be a positive determinant of institutional ownership irrespective of market conditions. Institutional investment proliferates with higher stock liquidity and PE ratio, while declines with augmented firm risk, current ratio and stock market turnover during post-crisis phase.Practical implicationsPolicymakers should construct a robust legal environment and focus to improve economic conditions to boost institutional ownership. Corporate executives should concentrate to increase stock liquidity and earnings of the firms, and lower market risk to draw more institutional portfolio investments.Originality/valueThis study would enrich emerging governance literature since studies on the determining factors of ownership holdings are limited in the emerging world. It adds novelty by capturing two different market conditions such as pre-crisis and post-crisis phases to obtain the time-dependent and time-independent determinants. It adds uniqueness by considering the determinants of institutional ownership, which is scarce in ownership studies.

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Foreign Institutional Investments in India: An Empirical Analysis of Dynamic Interactions with Stock Market Return and Volatility

Cited by 4 publications

References 0 publications

Interrelation between the Institutional Investors and the Union Budget in the Indian Stock Market

Interrelation between the Institutional Investors and the Union Budget in the Indian Stock Market

Do Lower Foreign Flows and Higher Domestic Flows Reduce Indian Equity Market Volatility?

What matters to ownership structure? Evidence from pre- and post-global financial crisis in an emerging market

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