An Empirical Investigation Of Dynamics Of Institutional Investors' Trading Behaviour And Stock Market Returns In India During COVID-19 Period

Abstract

The study has explored the dynamic interaction between Foreign Institutional Investors (FII) net investments and Domestic Institutional Investors (DII) net Investments in the Indian stock market for positive and negative feedback trading in both pre and during the COVID period. The study has applied multivariate causality model VAR and found FII series become much more responsive to NIFTY returns in the COVID period. Also, FII investments become more informative during the COVID period. When compared with the pre-Covid period, the effect of DII owned lagged investments has been dominated by the increased effect of FII net investments and NIFTY returns in shaping DII influx in the COVID period. NIFTY returns become nonresponsive to shocks in FII and DII net investments in the COVID period. The study can have substantial inferences for institutional fund flows to revive the Indian stock market from the shocks of COVID-19.