Investor Sentiment Index, FII Flows And Stock Market Returns – Evidence From India | Garima Gupta

This paper makes an attempt to develop three sentiment indices for the Indian stock market and also study the interrelationship between the developed sentiment indices with the Indian Stock Market as proxied by the BSE Sensex. Also, an attempt is madefor incorporating sentiment into the equation of FII flows and the stock returns framework analysed by various researchers, under the feedback trading literature. The findings suggest that sentiment causes net FII flows through the Indian stock market. Also, the results suggest a bi-directional causality running from stock market returns and sentiments.