Investigating the Determinants of Foreign Institutional Investor Inflows in Indian Equity Market: An Application of the Augmented Autoregressive Distributed Lag Bounds Testing Approach
Restricted accessResearch articleFirst published online October, 2023
Investigating the Determinants of Foreign Institutional Investor Inflows in Indian Equity Market: An Application of the Augmented Autoregressive Distributed Lag Bounds Testing Approach
The purpose of this study was to investigate the determinants of foreign institutional investors (FIIs) in the Indian equity market. For this purpose, the study has chosen country-specific push and pull factors for the period from January 2011 to December 2019. The beginning of the concerned period is marked by increased FII flows in the Indian market after the global financial crisis of 2008. The study has identified the stock market index of India, interest rate differential between India and the USA, inflation rate, and exchange rate as possible determinants of FII inflows in India and used the augmented autoregressive distributed lag (ARDL) approach based on the statistical properties of variables selected. The study found that in the long-run Indian stock market index, appreciating exchange rate, inflation, and interest rate differential are positively related to FII inflows in the Indian equity market whereas the US stock index is negatively related to FII inflows in India.
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