Purpose

The volatile nature of foreign portfolio flows, especially flows into debt market, has large implications on financial and macroeconomic stability in recipient countries. It is necessary to identify the main drivers of portfolio investments in bond market of developing economies to design effective policies to enhance resilience of the economy and help in managing capital flow volatility. The determinants of foreign portfolio investment to Indian equity market have been examined in literature, but flows to bond market remain unexplored. Thus, the purpose of this paper is to identify the possible determinants of foreign portfolio flows to Indian bond market both in the short and in the long run.

Design/methodology/approach

This study carries out a time series analysis by deploying autoregressive distributed lag (ARDL) approach to cointegration of monthly data of the period from January 2002 to December 2016 for the Indian economy. A mix of pull and push factors has been analysed in this study. Domestic growth, domestic stock market performance, interest rate differential, exchange rate, volatility in exchange rate, stock market returns in other emerging economies, foreign output growth and dummy variables to trace the external developments such as global financial crisis and unconventional monetary policies of advanced economies have been used as explanatory variables.

Findings

The dominant pull factor such as interest rate differential explains the dynamics of flows in Indian bond market. The relationship between capital movements and interest rate differentials is the most accepted paradigm in international finance (Haynes, 1988). Among other domestic factors are stock market performance, volatility in exchange rates and domestic growth rates which are found to be significant drivers of foreign portfolio bond flows to India. The study also confirmed that global conditions could induce a fast outflow of capital from India.

Research limitations/implications

The study concludes that both domestic factors and external factors are equally important in determining the foreign portfolio investments in the Indian debt market.

Practical implications

The empirical analysis conducted in this study suggests that direct and indirect measures can be taken to increase and stabilise foreign investments in the Indian bond market. Direct policy measures refer to those tools which are under the ambit of policymakers. Indirect measures comprise those tools that are not under the direct control of the fiscal and monetary authorities but require coordinated efforts of the government and private sector. In this context, strengthening of not only financial and economic but also administrative institutions will be necessary. Creditworthiness and policy credibility should be improved to address erratic foreign portfolio investment in debt market of India.

Originality/value

This study is an original research study. This study adds to the existing literature and is expected to guide policymakers on the specific aspect of the management of capital flows as it gets affected by changes in monetary and fiscal policies.

中文翻译：

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外国投资组合流入印度债务市场的决定因素

目的

外国投资组合流动，特别是流入债务市场的流动性，对受援国的金融和宏观经济稳定具有重大影响。有必要确定发展中经济体债券市场中证券投资的主要驱动力，以设计有效的政策，以增强经济的弹性并帮助管理资本流动的波动性。文献中已经研究了外国证券投资对印度股票市场的决定因素，但对债券市场的资金流尚待探讨。因此，本文的目的是确定从短期和长期来看，外国投资组合流入印度债券市场的可能决定因素。

设计/方法/方法

本研究通过使用自回归分布式滞后（ARDL）方法对印度经济2002年1月至2016年12月期间的月数据进行协整，从而进行了时间序列分析。在这项研究中已经分析了拉力和推力因素的混合。国内增长，国内股票市场表现，利率差异，汇率，汇率波动，其他新兴经济体的股票市场收益，外国产出增长以及用于追踪外部发展的虚拟变量，例如全球金融危机和先进的非常规货币政策经济已被用作解释变量。

发现

诸如利率差异之类的主导拉动因素解释了印度债券市场资金流动的动态。资本流动与利率差异之间的关系是国际金融中最被接受的范式（Haynes，1988）。在其他国内因素中，包括股市表现，汇率波动和国内增长率，这些因素被认为是外国投资组合债券流向印度的重要驱动力。该研究还证实，全球环境可能导致印度资本快速外流。

研究局限/意义

该研究得出的结论是，在确定印度债券市场上的外国证券投资方面，国内因素和外部因素均同等重要。

实际影响

这项研究进行的经验分析表明，可以采取直接和间接措施来增加和稳定在印度债券市场上的外国投资。直接政策措施是指政策制定者力所能及的那些工具。间接措施包括那些不受财政和货币当局直接控制但需要政府和私营部门共同努力的工具。在这种情况下，不仅有必要加强金融和经济，而且有必要加强行政机构。应该提高信誉度和政策信誉，以解决印度债务市场上不稳定的外国证券投资。

创意/价值

这项研究是原始研究。这项研究增加了现有的文献，并有望在资本流动受到货币和财政政策变化的影响时，指导决策者了解资本流动的特定方面。