Abstract
The paper uses Autoregressive Distributed Lag (ARDL) bounds testing approach to examine the dynamic behaviour of net foreign institutional investment flows on stock market returns in India for the daily data series from 1 st July, 1999 to 28 th February, 2009. By and large, the analysis reveals that there is an evidence of positive and negative feedback trading hypothesis in the short-run and long-run respectively. This implies that foreign institutional investment acts as destabilising forces in the short-run and has a smoothening effect in the long-run.
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