Institutional investment activities and stock market volatility amid COVID-19 in India

Abstract

This article examines institutional investors' investment activities and the impact of their trading styles on market volatility amidst COVID-19 in India. Specifically, it seeks to offer a comprehensive analysis of foreign portfolio investors' (FPIs) and domestic mutual fund managers' (MFs) investment on equity and debt securities. It examines whether their trading activities drive market volatility during the pandemic period. Also, it explores the impact of COVID-19 on the Indian equity market. This study finds that the growth of COVID-19 does not significantly affect the stock market volatility during the study period. Precisely, the findings reveal that the FPI's net selling of equity and their overall trading activities in the debt instruments positively impact the market volatility. Findings also show that the FPI's momentum buys and contrarian sales induce market volatility, whereas the MF's trading style does not significantly influence the volatility. The Granger causality tests indicate that the FPI's net sales of equity instruments cause the return volatility and that the market volatility does not drive the equity net sales. Findings also reveal that mutual-fund managers' trading behavior does not Granger cause market volatility; instead, volatility causes MF's net selling of debt instruments.

A multi-criteria based analytic framework for exploring the impact of Covid-19 on firm performance in emerging market

“…Naik et al. [65] analyzed the trading behavior of Institutional Investors, both foreign and domestic affects the market volatility. The study was made taking both Indian Equity and Debt market into consideration.…”

“… Exploratory Data Analysis Naik et al. [65] Trading behavior of Institutional Investors, both foreign and domestic affects the market volatility (Indian Equity and Debt market) from January 2020 to July 2020 EGARCH model Scherf et al. [66] Effect of the news of national lockdown restriction on stock exchange Event study Shen et al.…”

Effects of financial literacy on graduate school attitudes amidst COVID‐19

“…Priem (2021) ascertain that many investors in Belgium take a contrarian strategy by increasing their equity positions during the pandemic even though the future is unclear. In fact, Naik et al (2021) retrospectively show that the growth of COVID‐19 does not significantly affect stock market volatility, which is a great indicator that investments were not adversely impacted during the pandemic. Tauseef (2021) also find that, contrary to public belief, investor behavior in Asian countries became less irrational and more efficient throughout the pandemic, which was caused by the improved informational environment.…”

Foreign investors and stocks' volatility: evidence from COVID-19

“…At the global level, the Indian financial market holds a dominant position (Rao et al ., 2021). Post-1991, the opening of the Indian economy to foreign investors increased the institution's investment in the domestic market (Naik et al , 2022). The holding of stocks by foreign investors is improved after financial liberalization.…”