The paper examines the trading pattern of Foreign Institutional Investors (FIIs) and the Indian Mutual Funds (IMFs) across the days of the week for a period of nine years from January 2000 to January 2009. A set of parametric and econometric tests were employed to test the equality of daily mean investment of FIIs and IMFs. The findings of the study show that net investment made by the FIIs follow Friday effect, while the investments made by the IMFs are equally distributed among the various days of the week. As far as their relation with stock market trend is concerned, day anomalies in Indian share market return somehow correlated with the investment pattern of foreign institutional investment, as they behave in the same manner as the market is behaving.

Cross (1973) was the first to point out the differences in return across weekdays. Since then, the stock market efficiency is an extensively researched area of investment management. Day-of-the-week effect is the most talked anomaly. However, due to the increased use of Information Technology (IT) and the ongoing stock market reforms in various countries, investors might expect stock markets to be free from such anomalies. Despite frequent claims of market efficiency, literature on the subject offers evidence of seasonal/calendar anomalies both in the developed and emerging stock markets. A review of the existing studies, i.e., Rozeff and Kinney (1976), French (1980), Lakonishok and Smidt (1988), Cadsby (1989), Cadsby and Ratner (1992), Agrawal and Tandon (1994), Steeley (2001), Hellstrom (2002), Kok Kim (2002), Pandey (2002), Russel and Torbey (2002), Sales and Caro (2006), Sah and Omkarnath (2007), Baek et al. (2008), and Ricky et al. (2008), indicates that the stock markets of the developed as well as developing countries are not yet free from the seasonal anomalies, despite the increased use of IT and numerous regulatory developments.

Researchers have stated various causes in order to explain the days-of-the-week anomaly, specially the Monday and the Friday effects, just like the timing of earnings announcement, settlement effect, measurement error impact, and the liquidity effect or specialist effect bias etc. Besides these, several researchers, including Osborne (1962), Ritter (1988), and Lakonishok and Maberly (1990), suggest that the day-of-the-week effect may be driven by the trading pattern of individual investors, as they are of the opinion that individual investors face an asymmetry of brokers' recommendations in both form and time. Groth et al. (1979), Miller (1988), and Lakonishok and Maberly (1990) report that during weekdays brokers encourage individuals to buy. They find in their studies that analysts issue six buy recommendations for every sell recommendation. So during the weekdays, investors follow their recommendations of buying. However, during the weekends, when individuals have time to gather and process the information and to reach an investment decision, they make rational decision of buying and selling according to their perceptions, which make a significant difference to the investment pattern of weekdays and weekends.

Applied Finance Journal, Foreign Institutional Investors, FIIs, Indian Mutual Funds, IMF, Investment Management, Stock Market Reforms, Stock Market Movement, Econometric Tools, Investment Strategy, Econometric Models, Subprime Crisis, Local Mutual Funds, Mutual Fund Investments.