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The Nature and Determinants of Investments by Institutional Investors in the Indian Stock Market

Author

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  • Paramita Mukherjee

    (Eastern Institute of Integrated Learning in Management, Kolkata, India. E-mail: oparmita@hotmail.com)

  • Malabika Roy

    (Jadavpur University, 188, Raja S.C. Mallick Road, Kolkata 700 032, India. E-mail: malabikar@gmail.com)

Abstract

In India, the recent unprecedented rise in the capital market index is attributed to institutional investors like foreign institutional investors (FIIs) and domestic mutual funds. The nature of investments by FIIs has been examined in the literature, but that of mutual funds remains unexplored. This article tries to identify the possible determinants of the investment decision of mutual funds and compares the nature and determinants of their investment decisions to that of the FIIs. One of the most interesting findings is that mutual funds influence the decision of FIIs when they invest in equity and FIIs do exactly opposite to what mutual funds do. However, they both track international interest rates. Another remarkable finding suggests that mutual funds are more cautious when they invest in debt compared to equity. They look at so many factors in case of debt investment, but do not even look at the market return when they invest in equity.

Suggested Citation

  • Paramita Mukherjee & Malabika Roy, 2011. "The Nature and Determinants of Investments by Institutional Investors in the Indian Stock Market," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 10(3), pages 253-283, December.
    • Handle: RePEc:sae:emffin:v:10:y:2011:i:3:p:253-283
    DOI: 10.1177/097265271101000301
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Collins G. Ntim & Kwaku K. Opong & Jo Danbolt, 2015. "Board size, corporate regulations and firm valuation in an emerging market: a simultaneous equation approach," International Review of Applied Economics, Taylor & Francis Journals, vol. 29(2), pages 194-220, March.
    2. Pramod Kumar Naik & Imlak Shaikh & Toan Luu Duc Huynh, 2022. "Institutional investment activities and stock market volatility amid COVID-19 in India," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 35(1), pages 1542-1560, December.
    3. Chada, Swechha, 2023. "Economic policy uncertainties and institutional ownership in India," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).
    4. Naik, Pramod Kumar & Padhi, Puja, 2014. "An Empirical Evidence of Dynamic Interaction between institutional fund flows and Stock Market Returns," MPRA Paper 57723, University Library of Munich, Germany.
    5. Vardhan, Harsh & Sinha, Pankaj, 2014. "Influence of Foreign Institutional Investments (FIIs) on the Indian stock market," MPRA Paper 53611, University Library of Munich, Germany.
    6. Rajesh Mohnot, 2020. "Examining Granger Causality in the Behavioral Reactions of Institutional Investors— Evidence from India," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 22(04), pages 1-21, January.
    7. Harsh Vardhan & Pankaj Sinha, 2016. "Influence of Foreign Institutional Investments (FIIs) on the Indian Stock Market: An Insight by VAR Models," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 15(1), pages 49-83, April.

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    More about this item

    Keywords

    JEL Classification: F21; JEL Classification: F32; JEL Classification: G11; Institutional investment; stock market; foreign institutional investors; mutual funds;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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