Original scientific paper
https://doi.org/10.1080/1331677X.2021.1982399
Institutional investment activities and stock market volatility amid COVID-19 in India
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.
Keywords
Institutional investment; foreign portfolio investors; mutual funds managers; COVID-19; stock market volatility
Hrčak ID:
302059
URI
Publication date:
31.3.2023.
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