Abstract
The institutional investors, whether the DII (Domestic Institutional Investor) or FII (Foreign Institutional Investor) contribute to the growth and management of stock market. The stock market is very dynamic in nature and the volatility is prevalent across. It is important to understand the relation of different institutional investors on the stock market. Foreign institutional investors and Domestic institutional investors are two major sources from which the stock market receives its investment. Thereby, it is necessary to understand the cause and effect of these investments on the stock market. The flow of fund from the foreign investors is one of the reasons for the growth of Indian Stock Market. The cause-and-effect study gives us a better picture of the stock market movement and this study focuses on finding the same. The study will help investors and stockbrokers to understand the movement of the stock market in a better way. In this study, cause and effect between the FIIs, DIIs and Stock Market returns is analysed. The statistical tools used for analysis are Granger Causality test and Johansen Co-integration test. Both the statistical tool used are reliable and the expected results will be highly beneficial for the investors at large. The results shows that there is cause and effect relation between the FII and DII, but the co-integration between the FIIs, DIIs and stock market is absent. The study will contribute in understanding the behavior of stock market.
Highlights
The Indian Stock Market is interlinked with the changes happening around the globe
The period of study is from January 2014 to December 2019. commencing the literature, it has been experiential that the learning of interaction between the Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs) on Indian stock market no major data is necessary
The result of the study shows that there is a cause-and-effect relationship between the Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs)
Summary
The Indian Stock Market is interlinked with the changes happening around the globe. We live in a globalized world which runs on ripple effect. The stock markets in India are attracting large volume of investment from the Domestic Institutional Investors and the Foreign Institutional Investors. [1]The findings of several studies have shown that FIIs and DIIs such as (Loomba, 2012) and (French, 2011) helping in boosting the economy by increasing the foreign exchange reserves and shows a significant impact on the stock market. FIIs bear various kinds of business risks as well as political risk as it adds uncertainty to capital market. Due to this reason Foreign Institutional Investors do not receive the same favorable treatment as domestic investors get. We have established the cause-and-effect relation among DIIs and FIIs and result of both on the Indian Stock Market. The understanding whether the DIIs are affected with the FIIs or vice-versa will give us an understanding on the movement of the market
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