INDIAN SHARE MARKET
Author Abhijeet Tikudave
Literature Review
MMS
Roll NO: 62
Sectoral Analysis.
RANKIREDDY, A. S. et al. (2019) says that the relationship between sectors in the Indian stock market using a network algorithm perspective. The study finds that the Indian stock market is characterized by a high degree of interdependence among sectors, and the network algorithm approach provides a useful tool for analyzing the structure of the Indian stock market. The authors suggest that the findings of the study can be useful for investors and policymakers in understanding the dynamics of the Indian stock market and making informed investment decisions. However, it is important to note that this study is limited to the Indian stock market and may not be generalizable to other stock markets.
Dynamics of Volatility.
PADMASREE, K. (2023) examines the interdependence among sectors of the Indian stock market by studying the volatility spillover and connectedness between sectors. The author uses a dynamic conditional correlation framework to estimate the volatility spillover and connectedness among eight sectors of the Indian stock market. The sectors studied are banking, consumer goods, energy, finance, healthcare, IT, metals, and oil and gas. The findings of the study suggest that there is a significant volatility spillover and connectedness among the sectors of the Indian stock market. The banking sector is found to be the most influential sector, with the highest spillover effect on other sectors. The finance and energy sectors also have a significant impact on the other sectors. The study also finds evidence of a significant increase in volatility spillover and connectedness among the sectors during periods of financial crisis, suggesting that the Indian stock market is more integrated during such periods. Overall, the study highlights the importance of understanding the interdependence among sectors of the stock market and suggests that policymakers and investors need to take this into account while making investment decisions and designing risk management strategies.
Impact of Institutional Investors.
JAIN, A. (2022) examines the relationship between institutional investors and the Indian stock market performance. The author argues that the presence of institutional investors can have a positive impact on the stock market performance by increasing liquidity, reducing volatility, and improving the efficiency of the market. The article provides empirical evidence supporting these claims and suggests that the Indian stock market has experienced positive effects due to the increased participation of institutional investors in recent years. However, the author also notes that the impact of institutional investors on the stock market performance may depend on various factors such as the type of institution, the size of the investment, and the investment strategy. Overall, the article provides valuable insights into the role of institutional investors in the Indian stock market and highlights the need for further research in this area.
Investigating the Risk-Return.
NAGPAL, G et al. (2023) examine the risk-return dynamics of optimal stock portfolios in the Indian capital market. They focus on four stock market indices in India: BSE Sensex, BSE 100, BSE 200, and BSE 500. The findings of the study suggest that the optimal portfolios exhibit a positive relationship between risk and return, which is consistent with the theory of efficient portfolios. The authors also find evidence of a significant positive relationship between portfolio returns and the market return, suggesting that the Indian capital market is not fully segmented and that market-wide factors play an important role in portfolio returns. Furthermore, the authors find that optimal portfolios constructed using the BSE 500 index outperform portfolios constructed using other indices, indicating that diversification across a large number of stocks can lead to better risk-adjusted returns. Overall, the study highlights the importance of constructing efficient portfolios and diversifying across a large number of stocks in the Indian capital market. The findings suggest that investors should focus on selecting a well-diversified portfolio of stocks to achieve better risk-adjusted returns.
Assessing Volatility in the Banking Stock.
MALLIKARJUNARAO, K. (2021) examines the volatility of banking stocks in the Indian stock market during the COVID-19 pandemic. The author uses ARCH/GARCH models to estimate the volatility of 10 banking stocks listed on the National Stock Exchange of India 2020. He analyzes the impact of the COVID-19 pandemic on the volatility of these stocks and also examines the effect of the announcement of government policies and measures to mitigate the impact of the pandemic on the banking sector. The findings of the study suggest that the COVID-19 pandemic has had a significant impact on the volatility of banking stocks in the Indian stock market. The volatility increased sharply during the pandemic, particularly in March and April 2020. The author also finds evidence that the announcement of government policies and measures had a calming effect on the volatility of these stocks. Overall, the study highlights the importance of understanding the impact of external factors such as the COVID-19 pandemic on the volatility of stocks in the Indian stock market. The findings suggest that investors and policymakers need to take such factors into account while making investment decisions and designing policies to promote the growth and stability of the stock market.
Hedge Ratio.
SIREESHA, P. B. et al. (2022) examine whether the hedge ratio and hedge effectiveness of Indian stock market indices have changed after the COVID-19 pandemic. The authors use data from January 2019 to April 2021 to estimate the hedge ratio and hedge effectiveness of three Indian stock market indices: Nifty 50, Nifty Bank, and Nifty IT. They employ the ordinary least squares (OLS) regression method and the Vector Error Correction Model (VECM) to estimate the hedge ratio and hedge effectiveness, respectively. The findings of the study suggest that the hedge ratio and hedge effectiveness of the Nifty 50 and Nifty Bank indices have decreased significantly after the COVID-19 pandemic. However, there was no significant change in the hedge ratio and hedge effectiveness of the Nifty IT index. Furthermore, the study finds evidence of a significant positive relationship between the hedge ratio and hedge effectiveness for all three indices, indicating that a higher hedge ratio leads to better hedge effectiveness. Overall, the study highlights the importance of regularly monitoring and updating hedging strategies in response to changes in the market and external factors such as the COVID-19 pandemic. The findings suggest that investors and portfolio managers need to re-evaluate their hedging strategies and adjust their portfolios accordingly to minimize risk and maximize returns.
Linkages Between the movement of sectorial indices and macroeconomic variable.
PANDEY, S. (2022) examines the relationship between the movement of sectoral indices and macroeconomic variables in the Indian stock market. The author uses data from January 2010 to December 2019 to analyze the linkages between six sectoral indices (banking, capital goods, FMCG, IT, metals, and oil & gas) and four macroeconomic variables (inflation, interest rate, exchange rate, and industrial production). He employs the Granger causality test and the Vector Autoregression (VAR) model to estimate the causal relationships and dynamics among these variables. The findings of the study suggest that there are significant linkages between the movement of sectoral indices and macroeconomic variables in the Indian stock market. The author finds evidence of both short-term and long-term causal relationships between these variables, indicating that changes in one variable can have a significant impact on the other variables. Furthermore, the study finds that the banking sector index is the most sensitive to macroeconomic variables, followed by the capital goods and oil & gas sectors. The IT sector index is found to be the least sensitive to macroeconomic variables. Overall, the study highlights the importance of understanding the linkages between sectoral indices and macroeconomic variables in the Indian stock market. The findings suggest that investors and policymakers need to take these linkages into account while making investment decisions and designing policies to promote the growth and stability of the stock market.
Herd Behavior in Stock Market during Covid-19.
WARNE, D. P. et al. (2022) examine the presence and impact of herd behavior among investors in the Indian stock market during periods of extreme volatility and the COVID-19 pandemic. The authors use data to analyze the behavior of individual and institutional investors in the Indian stock market. They employ the cross-sectional absolute deviation (CSAD) method and the cross-sectional standard deviation (CSSD) method to identify the presence of herd behavior among investors. The findings of the study suggest that herd behavior exists among both individual and institutional investors in the Indian stock market, particularly during periods of extreme volatility and the COVID-19 pandemic. The authors find evidence of positive herd behavior among individual investors, indicating that they tend to follow the actions of other investors in the market. Furthermore, the study finds that herd behavior among institutional investors is more pronounced than among individual investors, suggesting that institutional investors have a greater influence on the overall behavior of the market. Overall, the study highlights the importance of understanding the impact of herd behavior on the Indian stock market. The findings suggest that investors need to be cautious while making investment decisions and should not blindly follow the actions of others in the market. Policymakers and regulators also need to take steps to promote transparency and reduce information asymmetry in the market to prevent the negative effects of herd behavior.
Pricing of Liquidity Risk.
CHERIYAN, N. K. et al. (2020) examine the impact of liquidity risk on stock prices in the Indian stock market. The authors use data to analyze the relationship between liquidity risk and stock prices. They employ the Fama-French three-factor model and the liquidity-adjusted CAPM model to estimate the risk premiums associated with liquidity risk. The findings of the study suggest that liquidity risk is priced in the Indian stock market, indicating that investors require higher returns to compensate for the additional risk associated with less liquid stocks. The authors find that stocks with higher liquidity risk have lower returns compared to stocks with lower liquidity risk, and the risk premium associated with liquidity risk is statistically significant. Furthermore, the study finds that liquidity risk is more pronounced in small-cap and mid-cap stocks compared to large-cap stocks, indicating that smaller stocks are more vulnerable to liquidity risk. Overall, the study highlights the importance of understanding the impact of liquidity risk on stock prices in the Indian stock market. The findings suggest that investors need to take liquidity risk into account while making investment decisions and should be aware of the potential impact on returns. Policymakers and regulators also need to take steps to promote liquidity in the market to reduce the negative effects of liquidity risk on investors.
Indian Stock Market and Global Stock Market.
KHANUM, A. J. et al. (2019) examine the relationship between the Indian stock market and global stock markets. The authors use daily data to analyze the inter-market relationships between the Indian stock market and six major global stock markets – the US, UK, Japan, China, Germany, and France. They employ the Johansen cointegration test and Granger causality test to examine the long-run and short-run relationships between the Indian stock market and global stock markets. The findings of the study suggest that there is a strong long-run relationship between the Indian stock market and global stock markets, indicating that the Indian stock market is integrated with global markets. The authors find evidence of bidirectional causality between the Indian stock market and the US, UK, and Japanese stock markets, suggesting that there is a significant transmission of information and volatility between these markets. Furthermore, the study finds that the US stock market has the strongest impact on the Indian stock market, followed by the UK and Japanese stock markets. The authors also find evidence of a weak relationship between the Indian stock market and the Chinese, German, and French stock markets. Overall, the study highlights the importance of understanding the inter-market relationships between the Indian stock market and global stock markets. The findings suggest that investors need to take into account the impact of global events and market movements on the Indian stock market while making investment decisions. Policymakers and regulators also need to take steps to promote transparency and reduce information asymmetry in the market to minimize the negative effects of global market movements on the Indian stock market.
CONCLUSION
The authors find that the financial and information technology sectors have the highest betweenness centrality, indicating that they play a crucial role in transmitting information and influencing the market The study also finds evidence of a positive relationship between the financial, information technology, and energy sectors, suggesting that movements in these sectors have a significant impact on the market. The sectors studied are banking, consumer goods, energy, finance, healthcare, IT, metals, and oil and gas. The findings of the study suggest that there is a significant volatility spillover and connectedness among the sectors of the Indian stock market. The importance of understanding the interdependence among sectors of the stock market and suggests that policymakers and investors need to take this into account while making investment decisions and designing risk management strategies. He focuses on three categories of institutional investors: foreign institutional investors (FIIs), domestic institutional investors (DIIs), and mutual funds. The findings of the study suggest that institutional investors have a positive impact on the performance of the Indian stock market. Specifically, FIIs and mutual funds have a significant positive effect on stock market returns, while DIIs have a smaller but still positive impact. They focus on four stock market indices in India: BSE Sensex, BSE 100, BSE 200, and BSE 500. The importance of constructing efficient portfolios and diversifying across a large number of stocks in the Indian capital market. The findings suggest that investors should focus on selecting a well-diversified portfolio of stocks to achieve better risk-adjusted returns. Also finds evidence that the announcement of government policies and measures had a calming effect on the volatility of these stocks. Overall, the study highlights the importance of understanding the impact of external factors such as the COVID-19 pandemic on the volatility of stocks in the Indian stock market. The hedge ratio and hedge effectiveness of three Indian stock market indices: Nifty 50, Nifty Bank, and Nifty IT. The Investors and portfolio managers need to re-evaluate their hedging strategies and adjust their portfolios accordingly to minimize risk and maximize returns. Analyze the linkages between six sectoral indices (banking, capital goods, FMCG, IT, metals, and oil & gas) and four macroeconomic variables (inflation, interest rate, exchange rate, and industrial production). Furthermore, the study finds that the banking sector index is the most sensitive to macroeconomic variables, followed by the capital goods and oil & gas sectors. The IT sector index is found to be the least sensitive to macroeconomic variables. They employ the cross-sectional absolute deviation (CSAD) method and the cross-sectional standard deviation (CSSD) method to identify the presence of herd behavior among investors. The findings of the study suggest that herd behavior exists among both individual and institutional investors in the Indian stock market, particularly during periods of extreme volatility. The investors need to be cautious while making investment decisions and should not blindly follow the actions of others in the market. Liquidity risk is priced in the Indian stock market, indicating that investors require higher returns to compensate for the additional risk associated with less liquid stocks. Liquidity risk is more pronounced in small-cap and mid-cap stocks compared to large-cap stocks, indicating that smaller stocks are more vulnerable to liquidity risk. Overall, the study highlights the importance of understanding the impact of liquidity risk on stock prices in the Indian stock market. Analyze the inter-market relationships between the Indian stock market and six major global stock markets – the US, UK, Japan, China, Germany, and France. The US stock market has the strongest impact on the Indian stock market, followed by the UK and Japanese stock markets. The authors also find evidence of a weak relationship between the Indian stock market and the Chinese, German, and French stock markets. Investors need to take into account the impact of global events and market movements on the Indian stock market while making investment decisions.
Reference
CHERIYAN, N. K.; LAZAR, D. (2020) Pricing of Liquidity Risk in the Indian Stock Market. Advances in Business-Related Scientific Research Journal, [s. l.], v. 11, n. 1, p. 23–35, 2020. Disponível em: https://discovery.ebsco.com/linkprocessor/plink?id=e56320ea-aa37-3c66-8b7f-cc4f720a67ba. Acesso em: 12 maio. 2023.
JAIN, A. (2022) Impact of Institutional Investors on Indian Stock Market Performance. IUP Journal of Applied Finance, [s. l.], v. 28, n. 4, p. 5–29, 2022. Disponível em: https://discovery.ebsco.com/linkprocessor/plink?id=83c55c0b-1b16-3009-9cd8-8df6b9dc2e9e. Acesso em: 12 maio. 2023
KHANUM, A. J. ; N. Vedashree; G., Suresh (2019) A Study on the Inter-Market Relationship Between Indian Stock Markets and Global Stock Markets. IUP Journal of Applied Finance, [s. l.], v. 25, n. 3, p. 47–65, 2019. Disponível em: https://discovery.ebsco.com/linkprocessor/plink?id=d2fb7fb2-d05d-31b3-ba5d-94b4aa5d545e. Acesso em: 12 maio. 2023.
MALLIKARJUNARAO, K. (2021) Assessing Volatility in the Banking Stocks in Indian Stock Market during the Covid-19 Pandemic: Using Arch/Garch Models. Annamalai International Journal of Business Studies & Research, [s. l.], v. 13, n. 1, p. 59–68, 2021. DOI 10.51705/AIJBSR.2021.v13i01.008. Disponível em: https://discovery.ebsco.com/linkprocessor/plink?id=951b832b-356c-349d-825f-db5bce48b3b4. Acesso em: 12 maio. 2023.
NAGPAL, G.; JADHAV, K.; SINHA, A. (2023 ) Investigating the Risk-Return Dynamics of Optimal Stock Portfolios in Indian Capital Market. IUP Journal of Accounting Research & Audit Practices, [s. l.], v. 22, n. 1, p. 93–112, 2023. Disponível em: https://discovery.ebsco.com/linkprocessor/plink?id=98c6aa49-6511-3e9d-a635-ada0d38ebd25. Acesso em: 12 maio. 2023.
PADMASREE, K. (2023) Dynamics of Volatility Spillover and Connectedness Among Sectors of Indian Stock Market. IUP Journal of Applied Finance, [s. l.], v. 29, n. 1, p. 5–31, 2023. Disponível em: https://discovery.ebsco.com/linkprocessor/plink?id=daa4d749-8b05-3fb7-a974-a1b459563440. Acesso em: 12 maio. 2023.
PANDEY, S. (2022) Linkages Between the Movement of Sectoral Indices and Macroeconomic Variables in Indian Stock Market: An Empirical Study. IUP Journal of Applied Finance, [s. l.], v. 28, n. 1, p. 15–25, 2022. Disponível em: https://discovery.ebsco.com/linkprocessor/plink?id=5629fb56-bebb-3d4f-89ed-8a899636ae09. Acesso em: 12 maio. 2023.
RANKIREDDY, A. S.; MALLIKARJUNA, M.; RAO, R. P. (2019) Sectoral Analysis of the Indian Stock Market — A Network Algorithm Perspective. International Journal of Business Insights & Transformation, [s. l.], v. 13, n. 1, p. 20–32, 2019. Disponível em: https://discovery.ebsco.com/linkprocessor/plink?id=5038afc1-0104-3033-ac53-4d898e64966d. Acesso em: 12 maio. 2023.
SIREESHA, P. B.; HARIPRIYA, T. (2022) Have the Hedge Ratio and Hedge Effectiveness of Indian Stock Market Indices Changed After Covid-19 Pandemic? IUP Journal of Accounting Research & Audit Practices, [s. l.], v. 21, n. 3, p. 61–76, 2022. Disponível em: https://discovery.ebsco.com/linkprocessor/plink?id=2e8aad52-858a-34e6-ac41-28f310c3593c. Acesso em: 12 maio. 2023.
WARNE, D. P.; SAINI, S. (2022) Herd Behavior in Indian Stock Market During Extreme Volatility and Covid-19 Pandemic. IUP Journal of Applied Finance, [s. l.], v. 28, n. 3, p. 43–53, 2022. Disponível em: https://discovery.ebsco.com/linkprocessor/plink?id=32e02adf-9005-396f-a593-e5c93755728e. Acesso em: 12 maio. 2023.