Mutual Fund Participation and Stock Market Development in India: An Econometric Investigation
- Authors
-
-
Deepak Amin
Indiagain Capital
Author
-
- Keywords:
- Array, Array
- Abstract
-
The Indian stock market has witnessed substantial transformation over the last two decades due to increasing participation of domestic institutional investors, particularly mutual funds and Asset Management Companies (AMCs). Mutual funds play a significant role in mobilizing household savings, improving financial inclusion, enhancing market liquidity, and supporting long-term capital market development. This study empirically investigates the relationship between mutual fund participation and stock market development in India during the period 2009–2024. The research employs econometric techniques including multiple regression analysis, Variance Inflation Factor (VIF), Chow Breakpoint Test, Quandt-Andrews Unknown Breakpoint Test, and Bai-Perron Multiple Breakpoint Test to examine the impact of various mutual fund investment activities on the SENSEX. The findings reveal that Mutual Fund Index Futures (MFIF) exert a statistically significant positive influence on stock market performance, indicating that derivative-based investment activities contribute meaningfully to market growth and liquidity creation. The study further identifies the existence of multiple structural breaks associated with major economic events such as demonetization, UPI expansion, and the COVID-19 pandemic, which significantly altered investor behaviour and financial market dynamics. The results confirm that mutual fund participation contributes positively toward financial market resilience, market stability, and the long-term development of the Indian stock market. The study provides important implications for policymakers, regulators, investors, and AMCs regarding the growing importance of domestic institutional investments in strengthening India’s financial ecosystem.
- Downloads
-
Download data is not yet available.
- References
-
Albuquerque, R. A., Koskinen, Y., & Santioni, R. (2021). Mutual fund trading and ESG stock resilience during the COVID-19 stock market crash (SSRN Working Paper No. 3928774). SSRN. https://doi.org/10.2139/ssrn.3928774
Albuquerque, R., Koskinen, Y., & Santioni, R. (2021). Mutual fund loyalty and ESG stock resilience during the COVID-19 stock market crash (ECGI Working Paper Series in Finance No. 746/2021). European Corporate Governance Institute.
Alexandri, M. B. (2015). Mutual fund performance: Stock selection or market timing. In Proceedings of the International Conference on Economics and Banking (ICEB-15) (pp. 112–118). Atlantis Press. https://doi.org/10.2991/iceb-15.2015.17
Alkassim, F. (2009). Mutual fund performance: Evidence of stock selection and market timing ability from Islamic mutual funds (Doctoral dissertation, Bangor University).
Benos, E., & Jochec, M. (2011). Short term persistence in mutual fund market timing and stock selection abilities. Annals of Finance, 7(2), 221–246. https://doi.org/10.1007/s10436-010-0173-3
Bose, S. (2012). Mutual fund investments, FII investments and stock market returns in India. Money & Finance, ICRA Bulletin, September, 25–42.
Chen, D. H., Chuang, C. L., Lin, J. R., & Lan, C. L. (2013). Market timing and stock selection ability of mutual fund managers in Taiwan: Applying the traditional and conditional approaches. Investment Management and Financial Innovations, 10(2), 25–38.
Chopra, M. P. (2011). Do Indian mutual fund managers select the stock and time the market correctly? IUP Journal of Applied Finance, 17(4), 58–72.
Chordia, T., Sarkar, A., & Subrahmanyam, A. (2001). Common determinants of bond and stock market liquidity: The impact of financial crises, monetary policy, and mutual fund flows. Federal Reserve Bank of New York Working Paper Series, 1–42.
Das, S., & Sett, K. (2025). Evaluating stock selection and market timing abilities of mutual fund managers. IUP Journal of Financial Risk Management, 22(1), 44–58.
Ederington, L. H., & Golubeva, E. V. (2011). The impact of stock market volatility expectations on investor behavior: Evidence from aggregate mutual fund flows (SSRN Working Paper No. 1782009). SSRN. https://doi.org/10.2139/ssrn.1782009
Hung, W., Lu, C. C., & Lee, C. F. (2010). Mutual fund herding and its impact on stock returns: Evidence from the Taiwan stock market. Pacific-Basin Finance Journal, 18(5), 477–493. https://doi.org/10.1016/j.pacfin.2010.06.001
Khan, A. Y. (2020). Relationship between mutual fund flows, stock market return and the economy: Evidence from Pakistan. International Journal of Financial Services Management, 10(3), 245–261. https://doi.org/10.1504/IJFSM.2020.111108
Kumar, P., Saxena, C., & Gupta, A. K. (2020). A study on relationship between stock market returns and mutual fund flows. Journal of Commerce and Accounting Research, 9(1), 15–23.
Mansor, F., & Bhatti, M. I. (2011). The Islamic mutual fund performance: New evidence on market timing and stock selectivity. International Conference on Economics and Finance Proceedings, 77–85.
Massa, M. (2004). Mutual fund competition and stock market liquidity (SSRN Working Paper No. 667962). SSRN. https://doi.org/10.2139/ssrn.667962
Mehta, D. (2014). Evaluating the stock selection skills and market timing abilities of Indian mutual fund managers. CLEAR International Journal of Research in Commerce & Management, 5(7), 34–41.
Oh, N. Y., & Parwada, J. T. (2007). Relations between mutual fund flows and stock market returns in Korea. Journal of International Financial Markets, Institutions and Money, 17(2), 140–151. https://doi.org/10.1016/j.intfin.2005.09.001
Rahman, A. H., Amirah, A., & others. (2018). Stock selection and market timing ability analysis of investment manager in equity mutual fund Sharia in Indonesia. International Conference on Applied Science and Technology Proceedings, 45–52.
Roy, S. K., Das, N. N., Bhasin, N. K., & others. (2024). Empowering robo-advisors: Data-driven mutual fund and stock market price prediction with deep learning techniques. In 2024 Third International Conference on Intelligent Systems and Machine Learning (pp. 1–6). IEEE.
Shawky, H. A., & Smith, D. M. (2005). Optimal number of stock holdings in mutual fund portfolios based on market performance. Financial Review, 40(4), 481–495. https://doi.org/10.1111/j.1540-6288.2005.00120.x
Shrider, D. G. (2009). Running from a bear: How poor stock market performance affects the determinants of mutual fund flows. Journal of Business Finance & Accounting, 36(1–2), 254–270. https://doi.org/10.1111/j.1468-5957.2009.02149.x
Sukarno, A., Oetomo, H., Sutanto, H., Liestyana, Y., & others. (2024). The influence of market timing ability, stock selection skill, fund age, and fund size on the performance of Sharia mutual funds. Equator Journal of Management and Entrepreneurship, 12(1), 55–67.
Thenmozhi, M., & Kumar, M. (2009). Dynamic interaction among mutual fund flows, stock market return and volatility (NSE Research Paper). National Stock Exchange of India.
- Downloads
- Published
- 31-03-2026
- Section
- Articles
- License
-
Copyright (c) 2026 Deepak Amin (Author)

This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
How to Cite
Share
Similar Articles
- Komal B. Sharma Komal B. Sharma, The Comparative and Risk-Adjusted Analysis of Selected Mutual Fund Schemes in India with Reference to Nifty 50 Index , Tark Tansaku: Vol. 1 No. 1 (2026): March 2026 Issue
- Sohini Priya, Ram Lakhan Singh, Sanatan Principles of Financial Management: The SHIVA Model , Tark Tansaku: Vol. 1 No. 1 (2026): March 2026 Issue
- Pankaj Sharma, Srinivasan Iyer, Bibliometric Analysis on Artificial Intelligence (2023-2026) , Tark Tansaku: Vol. 1 No. 1 (2026): March 2026 Issue
- Pragnesh Dalwadi, Deepa C. Chandwani, The Mundaka Upanishad and Contemporary Well-Being: A Philosophical Framework for Stress Management, Values and Spiritual Balance , Tark Tansaku: Vol. 1 No. 1 (2026): March 2026 Issue
You may also start an advanced similarity search for this article.
