Impact of Covid-19 Pandemic on the Investment Behavior of DIIs and FIIs on Indian Debt and Equity Markets

ABSTRACT

This paper aims to examine the impact of the Covid-19 pandemic on the investment behaviours of both Domestic Institutional Investors (DIIs) and Foreign Institutional Investors (FIIs) in the Indian debt and equity markets. The study is based on the daily time-series data from January 01,2015, to June 03, 2020. The study has constructed three Structural Vector Auto Regression dynamic models to compare the investment behaviors of FIIs and DIIs in both pre-and post-pandemic periods. The results indicate that the Institutional Investors' activities do not significantly impact the equity returns in the Indian markets, which has remained so in the wake of Covid-19. The debt purchases and sales for the DIIs are relatively more inelastic to market returns and reflect the risk-averse investment attitude of DIIs because of the negligible impact of Covid-19. There is a drop in the risk appetite of the FIIs due to a rise in the share of debt holdings in their portfolio in the wake of the Covid-19 pandemic.