Investment pattern of domestic institutional investors

Abstract

This research paper makes the first-ever study on the relationship between domestic institutional investors; DII, i.e., mutual fund; MF, insurance companies; INSU, development financial institution; DFI and banks with Indian stock market returns, at a disaggregated level. This analysis is based on ten-year daily data collected from Securities and Exchange Board of India, SEBI. During the study, Granger causality block exogeneity test verifies that stock returns predict MF, INSU, and DFI's investment behaviour. Additionally, correlation analysis shows a positive contemporaneous relationship of stock returns with buying and selling done by all the four DIIs. Quantile regression technique reveals that INSU and, MF are contrarian traders, whereas banks are momentum traders. With the analysis, we learnt that INSU is the most active trader at every quantile. MF is more active at lower quantiles. Banks are active traders at upper and lower quantiles, and DFI is active only at extreme quantiles.