Self-Reliance of Indian Capital Markets: A Transitory Phase or Sustainable Phenomenon

Abstract

This study explores the factors, which are saving Indian Capital Markets from drowning into the ocean of uncertainty. The analysis is done on the basis of daily Nifty 50 closing prices from January 1, 2011 to March 31, 2024 and market ownership reports available at NSE website. It is observed that the growing stake of private promoters, retail investors and domestic mutual funds in the Indian Capital Market are restraining it from falling, when FIIs are net sellers from last 8 years. Furthermore, stable ownership of Government, banks, insurance and financial institutions are also contributing to this cause. However, application of EGARCH model shows that these factors have also contributed to increased volatility in the capital market. With rise in the policy rates to pre-pandemic levels, increased economic activity and repeated incidents of financial crisis like COVID-19 and Ukraine-Russia war, Israel-Palestine war, the patience of retail investors is being tested and only time can tell that for how long the Indian retail investors can sustain such volatility. The findings of this study are consistent with Poshakwale and Thapa (2010), Didier and Schmukler (2013), Bhattacharjee and Singh (2017) and Raut (2020).

Keywords: Self-Reliance, FIIs, Crisis Periods, Retail Investors

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