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Portfolio Flows into India: Do Domestic Fundamentals Matter?

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Author Info
James P. F. Gordon
Poonam Gupta

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Abstract

This paper analyzes the factors affecting portfolio equity flows into India using monthly data. Flows to India are small compared to other emerging markets, but seem to be relatively less volatile. They also seem to be quite resilient. The paper shows that portfolio flows are determined by both external and domestic factors. Among external factors, LIBOR and emerging market stock returns are important, while the primary domestic determinants are the lagged stock return and changes in credit ratings. In quantitative terms, both external and domestic factors are found to be about equally important.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/20.

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Length: 37 pages
Date of creation: 27 Feb 2003
Date of revision:
Handle: RePEc:imf:imfwpa:03/20

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Related research
Keywords: Capital flows ; India ; Capital inflows ; Bonds ;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Elaine Karen Buckberg, 1996. "Institutional Investors and Asset Pricing in Emerging Markets," IMF Working Papers 96/2, International Monetary Fund.
  2. Kenneth A. Froot & Paul G.J. O'Connell & Mark S. Seasholes, 1998. "The Portfolio Flows of International Investors, I," NBER Working Papers 6687, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1993. "“Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," MPRA Paper 7125, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  4. Chuhan, Punam & Claessens, Stijn & Mamingi, Nlandu, 1998. "Equity and bond flows to Latin America and Asia: the role of global and country factors," Journal of Development Economics, Elsevier, vol. 55(2), pages 439-463, April. [Downloadable!] (restricted)
  5. Richard Portes & Helene Rey, 1999. "The Determinants of Cross-Border Equity Flows," NBER Working Papers 7336, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Anthony Richards, 2004. "Big Fish in Small Ponds: The Trading Behaviour and Price Impact of Foreign Investors in Asian Emerging Equity Markets," RBA Research Discussion Papers rdp2004-05, Reserve Bank of Australia. [Downloadable!]
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  7. Brennan, Michael J & Cao, H Henry, 1997. " International Portfolio Investment Flows," Journal of Finance, American Finance Association, vol. 52(5), pages 1851-80, December. [Downloadable!] (restricted)
  8. Reinhart, Carmen & Calvo, Guillermo, 2000. "When Capital Inflows Come to a Sudden Stop: Consequences and Policy Options," MPRA Paper 6982, University Library of Munich, Germany. [Downloadable!]
  9. Kenneth R. French & James M. Poterba, 1991. "Investor Diversification and International Equity Markets," NBER Working Papers 3609, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. John M. Griffin & Federico Nardari & Rene M. Stulz, 2002. "Daily Cross-Border Equity Flows: Pushed or Pulled?," NBER Working Papers 9000, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Nada Mora & Pietro Garibaldi & Ratna Sahay & Jeromin Zettelmeyer, 2002. "What Moves Capital to Transition Economies?," IMF Working Papers 02/64, International Monetary Fund.
  12. Michael J. Brennan. and H. Henry Cao., 1997. "International Portfolio Investment Flows," Research Program in Finance Working Papers RPF-271, University of California at Berkeley. [Downloadable!]
  13. John Clark & Elizabeth Berko, 1997. "Foreign investment fluctuations and emerging market stock returns: the case of Mexico," Staff Reports 24, Federal Reserve Bank of New York. [Downloadable!]
  14. Ashoka Mody & Antu Panini Murshid, 2002. "Growing Up With Capital Flows," IMF Working Papers 02/75, International Monetary Fund. [Downloadable!]
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ladekarl, Jeppe & Zervos, Sara, 2004. "Housekeeping and plumbing - the investability of emerging markets," Policy Research Working Paper Series 3229, The World Bank. [Downloadable!]
  2. Poonam Gupta, 2005. "Macroeconomic Determinants of Remittances: Evidence from India," IMF Working Papers 05/224, International Monetary Fund. [Downloadable!]
  3. Faisal Ahmed & Rabah Arezki & Norbert Funke, 2007. "The composition of capital flows to South Africa," Journal of International Development, John Wiley & Sons, Ltd., vol. 19(2), pages 275-294. [Downloadable!]
  4. James P. F. Gordon & Poonam Gupta, 2004. "Nonresident Deposits in India: In Search of Return?," IMF Working Papers 04/48, International Monetary Fund. [Downloadable!]
  5. Ministry of Finance, 2006. "Report of the Expert Group on Encouraging FII Flows and Checking the Vulnerability of Capital Markets to Speculative Flows," Working Papers id:351, esocialsciences.com. [Downloadable!]
  6. Ajay Shah & Ila Patnaik, 2005. "India's Experience with Capital Flows: The Elusive Quest for a Sustainable Current Account Defecit," NBER Working Papers 11387, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Norbert Funke & Faisal Ahmed & Rabah Arezki, 2005. "The Composition of Capital Flows: Is South Africa Different?," IMF Working Papers 05/40, International Monetary Fund. [Downloadable!]
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