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Portfolio Flows Into India: Do Domestic Fundamentals Matter?

  • Poonam Gupta
  • James P. F. Gordon

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
Date of creation: 01 Jan 2003
Date of revision:
Handle: RePEc:imf:imfwpa:03/20
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  1. Leonardo Leiderman & Carmen Reinhart & Guillermo Calvo, 1992. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Working Papers 92/62, International Monetary Fund.
  2. Kenneth R. French & James M. Poterba, 1991. "Investor Diversification and International Equity Markets," NBER Working Papers 3609, National Bureau of Economic Research, Inc.
  3. 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.
  4. R Portes & H Rey, 2000. "The Determinants Of Cross-Border Equity Flows," CEP Discussion Papers dp0446, Centre for Economic Performance, LSE.
  5. 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.
  6. 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.
  7. Mody, Ashoka & Murshid, Antu Panini, 2005. "Growing up with capital flows," Journal of International Economics, Elsevier, vol. 65(1), pages 249-266, January.
  8. 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.
  9. 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.
  10. Pietro Garibaldi & Nada Mora & Ratna Sahay & Jeromin Zettelmeyer, 2001. "What Moves Capital to Transition Economies?," IMF Staff Papers, Palgrave Macmillan, vol. 48(4), pages 6.
  11. 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.
  12. Elaine Karen Buckberg, 1996. "Institutional Investors and Asset Pricing in Emerging Markets," IMF Working Papers 96/2, International Monetary Fund.
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