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

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  • Pramod Kumar Naik
  • Imlak Shaikh
  • Toan Luu Duc Huynh

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.

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  • 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.
    • Handle: RePEc:taf:reroxx:v:35:y:2022:i:1:p:1542-1560
    DOI: 10.1080/1331677X.2021.1982399
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