Institutional Investments and Their Influence on Stock Returns – An Empirical Study

R. Venkataraman, Srinidhi V.R, A.S. Chandramouli

Abstract

Mutual dependency of market variables is crucial for development of any economy. It is equally important to study the stock market for what parameter influences over the others and for what length of time, thus giving direction to investors. Further, Sensex being an important barometer of India’s economic measurement, it would be interesting to know the revelation of its stability while institutional investors influence it in multiple ways over considerable longer period of economy. This study investigates the influence of FII and MF on Sensex over 11 year period between 2004-2015. The objectives were to find out the dependency among the three to conclude about which out theses influences market the most. On applying Unit–root test, Correlation and VAR, the study revealed that there was a regime change for BSE-Sensex returns due to the global recession. The noticeable fact is that change in regime affected the purchase of Mutual Fund which led to increasing in FII investment.   The variation in the investment patterns by institutions brought in heavy market movement. Indian stock market during the selected period was driven by a greater amount of Foreign Investors compared to the domestic investors, the Mutual Fund taken up for  this study.

Keywords

institutional investors; investment dependency; market movement; market stability; Regime change

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