Does Indian Stock Return Cause Foreign Institutional Investments?

Abstract

Foreign Portfolio investment received momentum after September J 992 when the Government of India decided to open the domestic stock market for foreign institutional investors. In 20 I 0, f oreign investors bought stocks and bonds valued at nearly US$ 221.34 billion. In this paper an attempt has been made to identify the causality between Net FIi and Market Returns using Granger Causality and Vector Error Correction Model (VECM) have been used to derive statistical robustness. We would like to see whether the conventional belief of Fil causes Market returns is true.