UNRAVELING THE IMPACT OF FPI AND DII ON INDIAN STOCK MARKET VOLATILITY

The purpose of this study is to examine how the flows of domestic institutional investment (DII) and foreign portfolio investment (FPI) impact the price volatility of Indian stock markets. This paper employing econometric models, including GARCH/ARCH models to capture volatility dynamics and the Johansen co-integration test to assess the relationships with secondary data from market indices the Nifty 50 and Sensex from 2006 to 2024. The analysis reveals that unexpected flow of FPI has a positive impact on market volatility. While DII flows play a stabilizing role, especially during the period of uncertainty. And there is ARCH effect in FPI and DII on Capital market. These findings have important implications for policy makers, researchers, regulators and Government.