Subject and purpose of work: The present study investigates dynamic interlinkages among institutional capital flows triggered by Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs)—market volatility, and liquidity in the Indian financial market from July 2018 to July 2024. Materials and methods: Using Augmented Dickey-Fuller (ADF) tests, Generalized Autoregressive Conditional Heteroskedasticity (GARCH) and Exponential GARCH (EGARCH) models, and a Vector Autoregression (VAR) model with Granger causality, impulse response functions (IRFs), and forecast error variance decomposition (FEVD), Results: the results identify asymmetry in volatility wherein the impact of negative shocks is stronger. FIIs are revealed to Granger-cause volatility and liquidity shocks, while DIIs have a left-lagged stabilizing effect. The results from IRFs and FEVD support the predominance of the short-run impact of FIIs. Conclusions: These results reveal the interdependence of institutional flows, liquidity, and volatility that can be useful for market players and policymakers seeking to improve stability, transparency, and efficiency in emerging financial markets.