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Determinants of Debt and Equity Mutual Fund Flows in India

XI Capital Markets Conference, 21-22 December 2012, Indian Institute of Capital Markets (UTIICM)

12 Pages Posted: 1 May 2013  

R. Madhumathi

Indian Institute of Technology (IIT), Madras

Naresh Gopal

University of Massachusetts, Dartmouth

M. Ranganatham

University of Madras

Date Written: December 21, 2012

Abstract

The analysis of debt and equity mutual fund flows identifies the presence of seasonality factors. The expected flows indicate stable investment interplay by mutual funds whereas the unexpected flows identify the presence of short-term volatility. The examination of whether positive feedback process is at work in the market reveals that equity funds are influenced by lagged returns while debt funds are not influenced by current or lagged returns. Examination of the equity fund flows identifies positive and negative feedback mechanism at work. In addition, lagged equity mutual fund withdrawals are seen in the long term analysis. There is outflow of funds when the market returns are negative but it is not causing spiralling effect on the market. In the debt market there is a one-way causation where the sale of funds has influenced a bearish market.

High market volatility and market volume have influenced the mutual fund flows. Market volumes also has positively influenced equity flows but has resulted in reduced activity in the bond flows. International influence is exhibited by equity fund flows through withdraw from the market on international market dominance. Investor sentiment, call market rate and dividend yields have also influenced the flow of mutual funds.

Keywords: Mutual Fund

Suggested Citation

Madhumathi, R. and Gopal, Naresh and Ranganatham, M., Determinants of Debt and Equity Mutual Fund Flows in India (December 21, 2012). XI Capital Markets Conference, 21-22 December 2012, Indian Institute of Capital Markets (UTIICM) . Available at SSRN: https://ssrn.com/abstract=2258306 or http://dx.doi.org/10.2139/ssrn.2258306

R. Madhumathi (Contact Author)

Indian Institute of Technology (IIT), Madras ( email )

Sardar Patel Road
Guindy
Chennai, TN Tamil Nadu 600036
India

Naresh Gopal

University of Massachusetts, Dartmouth ( email )

Dartmouth, MA 02747
United States

M. Ranganatham

University of Madras

Chennai, Tamil Nadu 600 005
India

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