Impact of Geopolitical Events on FII Investment Strategies in India

Abstract

This study examines the impact of geopolitical events on Foreign Institutional Investor (FII) strategies in India, focusing on capital flows and market volatility over a 10-year period (2015–2024). Using a quantitative methodology that incorporates panel regression and event study models, the research evaluates how international conflicts, diplomatic tensions, and external shocks influence FII behaviour. The findings reveal that geopolitical risk measured using the Geopolitical Risk Index (GPR) is inversely related to FII inflows and directly correlated with stock market volatility. Event studies further highlight the short-term market disruptions caused by significant events like the Russia-Ukraine war and India-China border conflicts. These insights offer valuable implications for investors, policymakers, and market regulators, emphasizing the need for robust risk management frameworks and informed policy interventions to ensure market stability during global disruptions.