Impact of Foreign Institutional Investor (FII) Flows on Indian Stock Market Dynamics: A Time-Varying Parameter Analysis

This study examines the time-varying impact of Foreign Institutional Investor (FII) flows on the Indian stock market (Nifty 50) from 2000 to 2024, using Time-Varying Parameter (TVP) models, including TVP regression, TVP-VAR, and TVP-GARCH. Findings reveal that FII flows significantly influence returns and volatility, with stronger effects during bullish phases and crises amplifying volatility via outflows. Macroeconomic factors (e.g., exchange rates, S&P 500) mediate these dynamics, with structural breaks identified during major events (e.g., 2008 crisis, 2020 COVID-19). The study underscores the need for adaptive regulations to manage FII-driven volatility, offering policy insights for enhancing market resilience.本研究选取2000年至2024年的样本数据，采用时变参数(Time-Varying Parameter, TVP)模型体系（包含时变参数回归、时变参数向量自回归及时变参数广义自回归条件异方差模型），考察境外机构投资者(Foreign Institutional Investor, FII)资金流向对印度股票市场（Nifty 50指数）的时变影响。研究结果表明，境外机构投资者资金流向对市场收益率与波动率均存在显著影响：牛市阶段的影响力度更强，危机时期则通过资金外流进一步放大市场波动率。宏观经济因素（如汇率、标普500(S&P 500)指数）在该影响机制中发挥中介作用，研究同时识别出2008年金融危机、2020年新冠疫情等重大事件期间存在结构断点。本研究强调需制定适应性监管政策以应对境外机构投资者引致的市场波动，为提升市场韧性提供了具有参考价值的政策启示。