Malabika Roy

The Nature and Determinants of Investments by Institutional Investors in the Indian Stock Market

In India, the recent unprecedented rise in the capital market index is attributed to institutional investors like foreign institutional investors (FIIs) and domestic mutual funds. The nature of investments by FIIs has been examined in the literature, but that of mutual funds remains unexplored. This article tries to identify the possible determinants of the investment decision of mutual funds and compares the nature and determinants of their investment decisions to that of the FIIs. One of the most interesting findings is that mutual funds influence the decision of FIIs when they invest in equity and FIIs do exactly opposite to what mutual funds do. However, they both track international interest rates. Another remarkable finding suggests that mutual funds are more cautious when they invest in debt compared to equity. They look at so many factors in case of debt investment, but do not even look at the market return when they invest in equity.

What Drives the Stock Market Return in India? An Exploration with Dynamic Factor Model

In this article, we examine the role of the institutional investors, both domestic and foreign, in driving the return on the Indian equity market in the last decade. An attempt is made to identify the influence of other possible determinants, more specifically domestic and international financial variables, on the market returns as well. Whether there is a change in the relationship is also studied. The results uncover some interesting facts. First, there is evidence of institutional investors driving the market return after 2008, though it did not have any impact before 2008. Second, the return is significantly led by the movement of interest rates within and outside the country for the entire decade. Third, most of the major and emerging stock markets and the US market also have significant influence on Indian equity market return. Fourth, gold return used to affect the equity market return in pre-2008 years, but it ceased to do so after 2008. The results show that the determinants of the Indian equity market return have changed after the recent economic crisis of 2008. JEL Classification: C53, G11, G21, F32

An Empirical Investigation of Volatility Clustering, Volatility Spillover and Persistence from USA to Two Emerging Economies India and China

The issues of volatility and risk in recent times have gained importance for financial practitioners, market participants, regulators and researchers. Volatility is the most basic statistical risk measure instrument. This chapter empirically investigates the pattern of volatility in the Indian and Chinese stock markets during 2006–2011 with reference to its time varying nature, presence of certain characteristics such as volatility clustering and existence of ‘spillover effect’ in the domestic and the US stock markets. This chapter will also try to estimate the persistence of shock in terms of half-life in each sub-period of study. It contributes to the body of knowledge by providing a holistic outlook to the subject of stock market volatility in India and provides evidence on its main features with the help of econometric techniques employing GARCH models. A comparative analysis is made with the Chinese stock market taking Shanghai Composite Index (SCI).

Structure, Conduct and Performance Analysis of Indian Commercial Banks:

The market structure, conducts and performance of the Indian banking sector have changed since the introduction of banking sector reforms. Slower economic growth, coupled with asset quality problems in recent years, has taken a toll on the overall health of the Indian banking sector. Higher statutory capital requirement under Basel III has posed another major challenge to the Indian banks. The purpose of the study is to examine the impact of structural changes and conduct of Indian commercial banks on their profitability in the paradigm of structure–conduct–performance (SCP) framework. Market concentration, bank-specific/macroeconomic variables have been considered as important determinants of the profitability. The regression results find a negative relationship between profitability and market concentration and reject SCP hypotheses. The study found that capitalization, credit risk, leverage and ownership structure are the most important determinants of the profitability of Indian banks. The study also found that financial crisis had no significant impact on the profitability of Indian banks. JEL Classification: C4, G21, G28, L19

Has Cement Manufacturing Across States in India Become More Equitable after Decontrol

The cement industry is important for research due to several reasons: Firstly, the Indian cement industry is the second largest in the world, even larger than the USA. Secondly, cement industry has very strong linkages to the infrastructure sector. There have been few detailed studies of this industry. In this paper, we study how the distribution of cement industry has changed across states due to the decontrol of industry. This is analysed in terms of the changing patterns of inequality as well as concentration. To this end, we use Gini Coefficient to study the regional inequality and Herfindahl Index to study concentration. The Cusum Test is carried out to examine structural breaks. In the paper, we also attempt to identify the significant explanatory variables, which can explain the growth of cement sales in different states. We also provide an economic rationale behind such growth patterns. Some policy implications which follow: construction codes of the government agencies may be modified to encourage the use of blended cement and tax breaks may be given to split plants to make the growth more equitable.

Does Political Identity Matter in Rural Borrowing? Evidence from a Field Survey

This study is based on a primary survey conducted over two consecutive years in two villages in the North 24 Parganas district of West Bengal, India. West Bengal has the unique feature of being under a single coalition government for the last 30 years. In this context, we examine the effect of different socioeconomic, political and demographic borrower characteristics on the probability of taking a loan from formal sources and the size of such loans taken. We find that political identity significantly affects the borrowers’ access to the formal loan market. Other factors that are significant in characterising the formal borrowers are occupational categories, landholding and religious status.