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Asian Journal of Management
Year : 2017, Volume : 8, Issue : 3
First page : ( 559) Last page : ( 568)
Print ISSN : 0976-495X. Online ISSN : 2321-5763.
Article DOI : 10.5958/2321-5763.2017.00090.7

Dynamics of indian stock market integration with global stock markets

Dr. Manu K S1,*, Menda Varsha L2

1Assistant Professor, Department of Management Studies, Christ University, Bangalore.

2Assistant Professor, Department of MBA, Acharya Institute of Technology, Bangalore

*Corresponding Author E-mail: manu.ks@christuniversity.in

Online published on 22 September, 2017.

Abstract

Financial markets all over the world witnesses growing integration within as well as across boundaries, spurred by deregulation, globalization and technological advancement. This paper investigate the integration and dynamic linkage of Indian Stock market with selected global stock market portraying the scenario to investors to make appropriate investment decisions. It specifically examines the possible volatility for the Indian stock market to ease the process of investors for construction of portfolio investing in global stock markets. The study used daily returns from 1st April 2004 to 31st March 2015. Granger causality test is done determining the causality effect. The study found that, the Indian market exhibits a very strong positive correlation with global market. The regression results indicate a significant positive impact of global indices on Indian stock market, thus the Indian market gets affected by the fluctuations in global market. Overall, the Granger Causality test indicates some unidirectional and bi-directional Granger causality effect among the selected markets indicating a dynamic linkage pointing out role on each other's’ movement. Thus suggesting the foreign institutional investors and Indian investors to accordingly take advantage of positive and negative movements and impart the same for optimum portfolio construction and can induce arbitrage opportunities even in day trading.

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Keywords

Stock Market Indices, Dynamic linkages, Statistical Analysis, Granger-Causality test.

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