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Decisive Economic and Stock Market Indicators on Foreign Institutional Investments: Evidence from India

Listed author(s):
  • T. Mohanasundaram

    (Kongu Engineering College, India)

  • P. Karthikeyan

    (Kongu Engineering College, India)

Registered author(s):

    This study explores the determinants of Foreign Institutional Investors (FIIs) investment in India and further more examines the association between FIIs investment and selective economic and stock market variables in both home (USA and UK) and host (India) countries using quarterly time-series data from January 2002 to December 2014.The Bounds F-test for cointegration indicates there is a long-run cointegration relationship among FII investments and its exogenous variables. The outcome of long-run coefficient estimate shows that exchange rate USD-INR has negative and significant impact on FII investments in India both in long-run and short run. NIFTY returns are having significant positive impact on FII investment flows both in long-run and as well as in short-run. Producer Price Index (PPI) of USA reveals positive relationship with FII investments to India only in long-run. Thus, FII investment in India is primarily decided by USD-INR exchange rate, NIFTY returns and USA’s Producer Price Index.

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    File URL: http://www.jami.org.ua/Papers/JAMI_6_1_43-57.pdf
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    Article provided by Department of Business Administration and Corporate Security, International Humanitarian University in its journal Journal of Applied Management and Investments.

    Volume (Year): 6 (2017)
    Issue (Month): 1 (February)
    Pages: 43-57

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    Handle: RePEc:ods:journl:v:6:y:2017:i:1:p:43-57
    Contact details of provider: Web page: http://mgu.edu.ua/pro-universitet/fakultety/ynstytut-natsyonalnoho-y-mezhdunarodnoho-prava/kafedra-biznes-administruvannia-i-korporatyvnoi-bezpeky

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    1. Xiaosong Zheng, 2014. "Factors Influencing Location Selection in Inward Foreign Direct Investment to China," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 3(1), pages 41-51.
    2. Gilberto Libanio, 2005. "Unit roots in macroeconomic time series: theory, implications, and evidence," Nova Economia, Economics Department, Universidade Federal de Minas Gerais (Brazil), vol. 15(3), pages 145-176, September.
    3. P. Srinivasan & M. Kalaivani, 2015. "Determinants of Foreign Institutional Investment in India: An Empirical Analysis," Global Business Review, International Management Institute, vol. 16(3), pages 364-376, June.
    4. Latifa Fatnassi & Ezzeddine Abaoub, 2012. "Analysis Of The Cross-Country Predictability Via The Study Of Cointegration: The Case Of Six Asian Emerging Markets," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 1(4), pages 376-387.
    5. Anatoliy G. Goncharuk, 2012. "Methodological aspects of investment decision making," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 1(3), pages 355-359.
    6. Anatoliy G. Goncharuk, 2015. "Application of the Investment Theory in Research and Practice," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 4(2), pages 119-126.
    7. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    8. Jagan Gaur & Mihir Dash, 2015. "Macroeconomic Factors and Performance of Indian Stock Market," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 4(1), pages 11-15.
    9. Christian E. Weller & Ghazal Zulfiqar, 2013. "Financial Market Diversity and Macroeconomic Stability," Working Papers wp332, Political Economy Research Institute, University of Massachusetts at Amherst.
    10. Vera Belaya & Jon Henrich Hanf, 2012. "Foreign direct investments as agents of change for Russian agrifood business," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 1(3), pages 312-318.
    11. Mihir Dash, 2015. "A Study of Granger Causality in Asian Stock Markets," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 4(3), pages 145-150.
    12. Yu Zhang & Xiaosong Zheng, 2016. "A Study of Herd Behavior Based on the Chinese Stock Market," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 5(2), pages 131-135, May.
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