A PRAGMATIC STUDY ON INTERACTIONS AND FREQUENCY OF NIFTY RETURN, INSTITUTIONAL INVESTMENT OF FOREIGN AND DOMESTIC FLOWS

Indian stock market has seen a prodigious growth among the emerging economies. The Nifty 50 index has doubled from 5866 pts to 10,440 pts from 2013 to 2019. Due to trade de-regularisation, flow of foreign investments and exchange rate fluctuations in the Indian stock exchanges has witnessed a greater volatility. Post financial crisis of 2008-2009, Foreign Institutional Investment flows are considered as a major cause for oscillation in stock exchanges of India. The growth seen in investments by Institutional Investors of both foreign (FII) and domestic (DII) in the last decade had been phenomenal from 53,404 crores to 1, 11,333 crores and from 24, 354 Crores to 82,595 Crores respectively. In this background, efforts have been made to study the interactions between purchases and sales of FII's and DII's, and the returns of Nifty 50. Employing Granger causality tests, it finds that there is a two-way directional connection established between FII and DII. However, the study does not find any statistically significance causality by FII's and DII's on returns of Nifty 50 indicating that neither FII nor DII cause volatility in the returns of nifty 50