Global Journal of Research in Management

Vijay Gondaliya ¹

Affiliations
1 B.V. Patel Institute at Uka Tarsadia University, IN

Abstract

India attracts a large sum of FIIs (Foreign Institutional Investors) every year. These foreign investments have a remarkable impact on Indian economy. The relationship of foreign exchange and FIIs with stock market is important because international reserves accumulation has been the preferred policy recently adopted by developing economies to achieve financial stability. Indian Stock Market, which is one of the indicators of the economic status, is also being affected by the foreign investments made and which can be made effect with the exchange rate. Present study investigates the impact of Net FII flows and Foreign Exchange Rate on Indian Stock Price Movements (BSE Sensex and CNX Nifty) in India, using monthly data from January 2008 to September 2016. The result shows that there is positive correlation between all the variables under study. The unit ischolar_main test was applied to determine stationarity of the time series data and then by applying the Granger Causality Test. The result represents that foreign exchange and FIIs of India has positive impact on BSE-Sensex and CNX-Nifty. There is bi-directional Granger Causality between BSE-Sensex, CNX-Nifty and US Dollar. There is no causal relationship between CNX-Nifty and Pound but uni-directional causality between BSE-Sensex and Pound. There is bi-directional Granger Causality between BSE-Sensex and FII flows but uni-directional causality between CNX-Nifty and FII flows.

Keywords

FIIs, Foreign Exchange, BSE-Sensex, CNX-Nifty.

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Manish R. Pathak ¹, Vijay Gondaliya ¹

Affiliations
1 Uka Tarsadia University, IN

Abstract

Contributing to the meager published literature on interrelationships amongst stock market sectors of an economy, Our study examines co-integration of NSE (National Stock Exchange) sectoral stock indices and BSE sectoral indices (Auto, Bank, Energy, Financial Services, FMCG, IT, Metal and Realty). The data correspond to daily closing prices for 8 sectoral indices of the Indian stock market, covering the period between 1st January, 2011 to 30th October 2016 The study concludes on the sectoral indices from NSE and BSE where bi-variate co-integration test suggest that there is a diversification opportunity available for investor in FMCG, IT and Metal index. Further the multivariate analysis shows that among all BSE and NSE sectors, they are co-integrated that means portfolio will not be benefited due to long term relationship among NSE and BSE sectoral indices.

Keywords

Co-Integration, Sectoral Indices, NSE, BSE, Portfolio.

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