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Apeejay Journal of Management and Technology (2009)
Volume 4, Number1, Pages: 35-46.

FIIs Investment Behaviour a...
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FIIs Investment Behaviour and Indian Stock Market: A ...

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FIIs Investment Behaviour and Indian Stock Market: A ...

  1. 1. Article Apeejay Journal of Management and Technology (2009) Volume 4, Number1, Pages: 35-46. FIIs Investment Behaviour and Indian Stock Market: A Causality Test Karimullah1 1 ICSSR Fellow, GB Pant Social Science Institute, Jhusi, Allahabad ABSTRACT The article examines the impact of Foreign Institutional Investors' (FII) equity investment behaviour in the Indian stock market. It attempts to find out the two-way (bidirectional) causality between foreign institutional investors (FIIs) behaviour and performance of Indian stock market for the period of January, 1997 to June, 2007. This article seeks to examine the idea that financial liberalization induces increased efficiency in the financial market as permission of FIIs equity investment is an important example of financial liberalization. Return in the stock market is used as proxy for the efficiency of the stock market in India. Granger Causality Test has been applied to test the bidirectional causality. Apart from net investment of FIIs, the 'Purchase' and 'Sales' behaviour of FIIs are analyzed separately. The result indicates that stock market performance is a major determinant of both the FIIs purchase and sales behaviour. But we did not find any strong evidence that the variations in the stock market indices are determined by FIIs investment behavior.

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