Indian Equity Markets

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Indian Equity Markets: Performance Analysis over 2009

-- M Syam Babu

Faculty Associate, FedUni, Hyderabad.

-- Dr. B Ramachandra Reddy Professor,Department of Commerce,

Sri Venkateswara University, Tirupati.

-- Dr. G Narasimhulu,

Lecturer, SKIT, Srikalahasti.

After the global meltdown in 2008, the year 2009 was one of recovery instilling hope amongst

equity investors. The Indian equity markets witnessed a sharp upward rally from the lows that

were witnessed in March 2009. Positive economic data from the Western world, improving

consumer confidence, increasing industrial production, and rising domestic consumption are some

of the factors that have lent strength to the equity markets. This article analyzes how the Indianequity markets performed in 2009.

After a rapid downfall in 2008, the Indian capital markets performed very well in 2009. After

starting off in a whimper on the back of weak global cues and the Satyam fiasco, the Sensex, in

2009, surprised investors by gaining 80% over the previous year, Actually, the bellwether index

doubled itself towards the end of the year from its March bottom level of 8160. The gravity-defying

move by the equity markets was largely driven by improving economic conditions and ample

liquidity available in the system. At the dawn of the New Year, a sense of excitement, mixed with

apprehensions, prevailed in the air. Will the good run of the sensex continue in 2010? Actually, in

2009, all sectors did not participate in the upward rally of the stock market. Hence, the

performance in 2010 will depend on the sector wise performance in 2009. This article presents the

performance of various sectors in 2009 and the macro elements which the investors have to

observe in the current year to make their investment decisions.

Broadly, the major sectors involved in stock market activity are: auto, banking, capital goods,

consumer durables, FMCG, healthcare, information technology, metal, oil and gas, power and

realty stocks. The BSE maintains sectoral indices for these segments. The performance of the

equity market is explained with the help of these sectoral indices. The BSE sensitive index (30

Scrips) (Sensex) increased from 9,903.46 points on 1-1-2009 to 17,464.81 on 31-12-2009. This

means that the Sensex increased by 76.35% during 2009. The lower limit of sensex during 2009

was 8, 047.17 (recorded on March 6, 2009) and upper limit was 17,464.81 points (recorded on the

last trading day of 2009). The average monthly returns from the Sensex was 5.49% and the

monthly compounded returns was 5.07% during the year. FMCG sector was the worst performerand the metals sector was the best performer during this period. While the FMCG, healthcare,

realty, oil and gas and power indices underperformed, the banking, consumer durables, IT, auto

and metal indices over performed during 2009, compared to the Sensex. The details are given in

Table 1 and Figure 1.


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As can be seen from Table 1 and the Figure 1, the metal sector gave more than 10% returns per

month. The stocks of SAIL, TATA Steel, Jindal Steel, NMDC, etc., performed very well during 2009.

It appeared that the monetary stimulate packages announced by the government at the end of

2008 and at the beginning of 2009 had begun to yield results. The stocks of Tata Motors,

Mahindra&Mahindra etc., gave the best returns in the year. The monetary policy of RBI gave a

further impetus to the financial sectors. The 18 shares in the banking index showed an upward

trend during the study period. Overall, the average monthly returns of all indices was more than

3%, compounded monthly returns more than 2.85% and the annual returns of all indices was

more than 40%.


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Though the Sensex gave more than 85% returns in 2009, it is far below its all time high by

17.65%. The auto, FMCG and healthcare sectors managed to recover all the capitalization which

was lost during the panic conditions that prevailed in 2008 and reached new highs in 2009.

Although the remaining sectors did not recover their lost capitalization, they performed well in

2009, compared to their respective lows in the previous year. The realty sector witnessed its worst

performance in 2009. Realty stocks like DLF, Unitech, etc., lost more than 60% of their market

capitalization. DLF lost its 5th rank and stood at the 21st place in the order of total market

capitalization of the companies in the country. Many reasons can be identified for the poor

performance of the realty sector. Though this sector recovered by more than 270% from its 2009

lows, yet it could not recover more than 65% market capitalization from its all time high, which

was recorded on January 8, 2008. Another sector which did not recover its lost capitalization was

consumer durables. This sector was unable to recover more than 44% capitalization. The details of

performance of various sectors are presented in Table2. Potential investors have to conduct a

fundamental study of various stocks before investing in the stock markets.

IPO Performance

During 2009, 20 companies came out with IPOs and raised Rs. 19,303.81 cr. Of these 20

companies, nine companies failed to maintain even their issue price in the secondary market. It

means that 45% of the IPOs in 2009 failed to bring listing gains to the investors. The total market

capitalization of the issues was reduced by just 1.25% (from Rs. 19,303.81 cr to Rs. 19,545.63 cr

by the end of 2009). Two companies out of 20 companies lost more than 40% and only two

companies gave more than 100% returns within a short period of time to their investors. The

details of the IPO performance are presented in Table3. The performance of public issues during

2009 stands in stark contrast to that in 2007, when companies like Edelweiss Capital and Mundra

Port, listed at about 75% premium and gave more than 200% returns. Out of the 103 companies

that got listed during 2007, 62 companies gave more than 50% returns. The participation of retail

investors was also very low during 2009. Overall, in the 20 public offers, the average retail

participation was 2.36 times a sharp decline from 2007, when the average subscription was 14times.

Highly sub-scribed IPOs also failed to hold to at least their issue price. For example, the IPO of

NHPC, which attracted huge investor response, lost 10.42% of its issue price. The IPO of Edserv

Softsystems IPO, which gave 265.08% returns, was subscribed only 1.30 times and retail

investors subscription amounted to 1.02 times. Some analysts may argue that small stocks give

good returns through public issues. But the IPO of Euro Multivision Limited yielded a negative

return of 58.87%, whereas Oil India Limited increased its market value by 14.34% in 2009.

Hence, the issue price is not a criterion to judge the performance of a public issue. The first issue

to attract investors under the anchor investor scheme in India, the Adani Power IPO, also failed to

hold its issue price in secondary market. The main reason for the under performance of the IPOs inthe secondary market is that the company coming out with the IPO discounts its forecasted future

earnings to fix the price of IPO and follows an aggressive pricing strategy, whereas the traders

follow the market multiples to deal with secondary market operations. Though the long-term

investors will benefit from the IPOs, the short-term investors must take adequate care while

investing in the IPOs.

It is known that the returns from investment in capital market depend on the macro and micro

environment. The macro environment consists of the economic, political, psychological and

demographic factors. The political environment in 2009 was very attractive. For the first time in

the history of Dalal Street, trading had been suspended for an increase in value of the Sensex. On

May 18, 2009, after the declaration of results of the General Elections, Sensex increased to

14,284.21 points level from the previous closing of 12174.42 points, up 17.34%. This shows that

market sentiments play a very crucial role in determining the market returns. Also, any positive
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development in the European or the US markets has an immediate effect on the sentiments of the

investors. The economic factors in 2009 also attracted investments. After a sharp decline in the

growth rate in 2008, the Indian economy in 2009 exhibited signs of recovery with accelerated

growth in GDP. According to the estimates of the Central Statistical Organization (CSO), real GDP

growth recovered to 6.1% in the second quarter of 2009 from 5.8% in the first quarter. It further

increased to 7.9% in the third quarter. The sequential recovery was driven by notable turnaround

in industrial output (9.0%) and services sector (9.0%). The agricultural sector also recorded a

positive growth (0.9%), despite drought like conditions in some parts of the country and floods in

the others during the year. The growth in industrial production also accelerated to 7.1% during

April-October, 2009 and further rose to 11.7% in November, 2009. The inflation rate, based on

WPI, showed significant volatility during the year. Year-on-year WPI inflation turned negative

during June-August 2009, and later returned to a positive zone in the wake of a spurt in prices of

food items and rise in global crude oil prices. The annual year-on-year inflation for the month of

November 2009 based on monthly WPI increased to 4.8%, as compared with 1.3% in the previous

month. But food inflation, which increased to 19.8% towards the end of the year due to deficient

monsoon exacerbating supply conditions, brought negative sentiment in the market. Prices of

essential commodities have been steadily increasing. These macro environment factors are,

however, expected to show a positive performance in 2010. However, uncertainty about the

performance of the developed economies remains a key concern for the equity markets in this

year. Also, the strategy to be adopted by the RBI to exit from the fiscal and monetary stimulus

measures would add to the volatility in the equity markets. Apart from these factors, investors

have to observe the micro environment in 2010. According to market analysts, the year 2010

would be one of consolidation. Hence, inventors have to search for stock-specific investment

opportunities based on growth rate in sales, earnings profits and PE multiples of the company.

Conclusion

The selection of an equity investment opportunity depends on many macro and micro elements.

Potential investors have to keep both these factors in mind while investing in 2010.

Reference # 6M-2010-02-02-01.

The Current Bull Run Can It Sustain ?

-- Ashish Pai

Freelance Writer,

Mumbai.

The Indian stockmarket indices have been witnessing a strong upward rally in the past few months

powered by FII inflows and positive global market cues. While this rally has elicited optimism andjoy among the investors it has also fueled a debate: is this rally sustainable?

The Sensex has more than doubledfrom a low of 8,160 on March 09, 2009 to 16,843, as on

October 08, 2009. This phenomenal rise and that too in such a short span of time is

unprecedented. While the investors are rejoicing over this huge increase in the stock market

indices, they are also anxious about whether this bull run will sustain (Refer Table 1). Before

delving into this, we shall first try to identify the reasons for this current bull run. We will also

`attempt' to understand whether the market is overvalued and whether the bull run can sustain.

(The word `attempt' here is significant because, plainly speaking, it is difficult to predict the

market. Market collectively functions in a particular manner. It leads the way and we are just

followers of the market trend.)


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Reasons for the Bull Run

Some of the reasons for the recent stock market bull run are enumerated below:

Liquidity and FII Inflows

The most significant contributor to the stock market bull run has been the FII inflows. With most of

the central banks across the world following an `easy' monetary policy, the global financial systemis flush with funds. As such, there has been a massive inflow of funds into emerging markets like

India. The total inflow of funds on account of FII investments for the last seven months (April 01,

2009 till October 07, 2009) was Rs. 68,323 cr.

Indian Companies not Heavily Affected by Global Downturn

The corporate results for the financial year 2008-2009 and also for the first quarter for 2009-2010

reveal that Indian companies have delivered better than expected results. The global credit crisis

has not impacted the Indian companies severely.

Government Policies

The results of the 15th Lok Sabha general elections were a positive surprise. The mandate for a

stable government at the center increased market expectations with regard to economic reforms,

stable policies and good governance. It is expected that the newly formed government will be able

to deliver on key economic initiatives, especially in the financial sector such as banking, insurance,

etc., and socially important sectors, like healthcare, infrastructure, education, etc. The

disinvestment process has been kicked off by the government with the primary market issues of

NHPC and Oil India. It is expected that some public sector banks and power utilities will also tap

the primary market soon.

Signs of global economic recovery

Signs of revival are emerging from the developed economies. Data from the different sectors of

the economy has been encouraging. It seems that the worst is over and we have begun to see the

"green shoots." However, there are concerns whether this recovery is for real or is just an

aberration.

Increase in Capex

Corporates have started raising funds for capital expansion and are venturing into new vistas. The

M&A arena is also witnessing action.

Low Inflation


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The low inflation levels have helped the Indian corporate to raise funds at cheaper interest rates.

The RBI has been following an easy monetary policy giving a further impetus to revival and

growth.

Is the Market Overvalued

A mere look at the Sensex or Nifty numbers does not give an idea if the market is overvalued.

What actually matters is the earnings outlook of the companies. It would be incorrect to assume

that the markets are cheaper when the Sensex is at 10,000 or that they are more expensive when

it is at 16,800. That is because a market is valued according to the estimated future growth in

profits of companies. The growth outlook for companies could be brighter when the market is at

16,800 points and so the market could actually be cheaper at those levels. Conversely, if the

prospects for growth are muted going ahead, the market could be expensive even at 10,000

points. So, one useful metric that can be used to accurately value the market is the price-earnings

(P/E) ratio. The current P/E ratio for the Sensex is 22.39. The ratio for the other indices is given in

Table 2. Another metric to value the market is the dividend yield. If the dividend yield is, say 3-

4%, then it is worth buying the stocks because the current returns are good and one can expect

capital appreciation over the next few years. The current dividend yield for the Sensex is 1.10.

In case the future earnings are expected to be better, the indices may have a higher P/E ratio.

When the Sensex touched 21,000 levels, the P/E ratio was 25.53 and Dividend Yield was 0.88.

Bull Run can be Sustained if ..

Economic Growth

In terms of earnings growth, the first quarter results of India Inc. have been encouraging, with

better-than anticipated numbers. This is important because analysts believe that it has triggered

an earnings upgrade cycle, which would provide support to the market. The upward revision in the

earnings estimates has been largely driven by automobile, infrastructure, cement, information

technology (IT) services and banking stocks. A more widespread recovery in economic activity,

pick-up in investment and consumption, along with improving global scenario, are expected to

further upgrade the earnings estimates.

Continued FII Inflows


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The flow of money into Indian markets from FIIs has to continue for the bull run to continue. One

of the reasons for the market crash in the first three months of this year was the pull out of money

by FIIs.

Government Push for Economic Reforms

The high fiscal deficit and the large borrowing program also mean that there is a limited window

for action. A 'loose' monetary policy could trigger off inflationary pressures next year and,

combined with the governments borrowing it could crowd out private borrowers. This is something

that the government should guard against. The future of the economy lies in the hands of the new

formed government which can either take the economy to a higher growth path (and the stock

market will follow) or can waste the opportunity and fail to capitalize on India's potential.

Inflation Management

Another major requirement is managing the inflation. It is expected that with a rise in the prices of

consumables, inflation may rise which may cause a rise in the interest rates. This will increase thecost of borrowing for corporates,leading to lower profits.

Capital Market Initiatives

The government should facilitate greater market participation by provident funds, pension funds,

etc. It should also look at removing Securities Transaction Tax and certain other impediments so

that there is an impetus for the growth of capital markets.

Conclusion

It is important for India to undertake structural and progressive reforms so that the benefits ofliberalization and economic growth trickle down to all segments of society. If a large section of the

Indian society can participate in contributing capital to the corporates via the stock market, it will

be a true bull run which can sustain for a very long time to come irrespective of the changes in the

global market. The time for reckoning has come and all players involved in the market, be it

investors, industry, or the government should contribute to the development of a robust capital

market.

Reference # 6M-2009-11-02-01.

Optimism in Indian Stock Markets: How Long Will It Last?

-- Bhaskar Mutyala,

Faculty Associate,

Academic Wing (Finance),

FedUni, Hyderabad.

Indian stock markets have rebounded drastically in the last few months aided by the global stock

market rally, optimism in the international markets, pick up in the industrial activity and a growing

belief that the worst is behind us. Will this rally continue is what remains to be seen.

It has been 20 months since the bull market peaked in January 2008. The Indian markets are

again witnessing new levels of optimism. From the extreme pessimism that prevailed in March

2009, this optimism has been built in just six months. It seems like the Indian stock markets are

oscillating between extreme optimism and pessimism. This is not the first time that Indian markets


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are exhibiting this trend. Ever since the ongoing economic reforms have put India on the list of

emerging economies, Indian markets have became the target of low yielding funds from developed

economies.

In the year 2008, the early days of global economic recession, there was a perception that

emerging economies have decoupled from the developed markets and they can continue to growwithout the FII funds and any adverse development in the developed economies would not have

any repurcussions on these economies. It was argued that internal consumption in these

economies was sufficient to achieve the targeted economic growth. But all these theories were

proved wrong and Indian stock markets witnessed a huge decline in the year 2008 in sync with the

global stock markets.

The root cause of the recent global recession was the massive build up of leverage and creation of

liquidity glut which caused the market participants to overlook the risk and inflation that was being

built in the asset prices. This created a huge bubble in the all asset prices including the emerging

economy stocks. The US subprime crisis finally caused the bubble to burst. This subsequently

created a massive upheaval in the financial markets across the world. The collapse of big

investment banks in the US created a liquidity crunch in the global economic system. In 2008, the

emerging economies witnessed a huge outflow of funds (FII outflows). This again caused the stock

markets in the emerging economies to crash.

Indian stock markets, mostly driven by the FII investments, also witnessed a huge outflow of

funds. In 2008 itself, FIIs pulled out Rs. 52,794 cr dragging down the Nifty to 2000 levels which

subsequently created extreme pessimism in the markets. This pullout continued until March 2009

with a net amount of Rs. 58,480 cr. The global recession and the extreme pessimism also had an

effect on the real economic indicators. Negative IIP growth numbers were witnessed for four

subsequent months from December 2008 to March 2009 (Refer Chart 1).

In order to combat the global economic recession and prevent it from further deteriorating into a

depression, governments across the globe announced a host of stimulus packages. These stimulus

packages were aimed at saving the economies from recession. The US government too declared

massive stimulus packages and brought down interest rates to almost zero. In line with the global

economies, the Indian government also declared various stimulus packages in 2008 to boost the

industries in the economy to combat the global recession.


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However, there was a perception that the announced stimulus packages would not be sufficient for

the economy to combat the crisis. Hence, extreme pessimism prevailed in the markets from

January to March 2009 despite the stimulus support from the governments. The US stimulus

packages resulted in pumping of huge chunk of dollars into the global economic system; which

ultimately chased the potential emerging economy stock markets and commodities. All these

factors led to a turnaround in the global stock markets.

From April this year, the Indian markets have seen huge FII inflows, causing the stock market to

rise from the historic low levels that were witnessed in March. The government's stimulus

packages started yielding positive results from April onwards. The IIP reached a peak level of

10.4% in August this year, which again attracted more FII funds into the Indian markets. By the

end of September 2009, Indian markets attracted a cumulative FII net inflow of Rs. 60,000 cr.

This figure is expected to break the historical net inflows of Rs. 70,245 cr witnessed in the year

2007. All these developments have ultimately changed the entire perception in the market

postponing the much awaited correction. Benchmark index Nifty crossed the psychological barrier

of `5000' mark in October and continues to sustain above that.

Stock Market PEs

Despite all these developments, the markets appear to be in a bubble zone as the Nifty is now

trading at a PE multiple of nearly 24, which is just below the PE multiple peak of 28 that prevailed

in January 2008 just before the crash. If we analyze the PE multiple data of the last 10 years

(given in Chart 2), we can observe that it averaged 17 and was mostly oscillating between the 15

and 20. Whenever there was a deviation from this range, there was corresponding optimism and

pessimism in the market. Indian markets have witnessed the similar kind of optimism that is being

witnessed now, three times in the last ten years, the dotcom boom of 2000, the first leg of bull

market in 2004 and the global credit boom of 2007. At all these times, the PE multiple was above

the level of 22 and FII inflows were also at the peak (Refer Table 1).


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After every case of over optimism, the markets witness a correction that take the stock valuations

again to the below average levels. All these corrections are usually led by the huge outflow of FII

money from the stock markets (Refer Table 1). After both the dotcom bubble in 2000 and credit

bubble in 2007, the markets failed to overcome the pessimism which extended the period of

recovery. But post the correction in 2004, economic indicators and valuations favored the bulls

which took the market into a sustained long-term bull phase.

One thing is for sure even for the events happening in the markets now. Following this over

optimism, there should be a market correction that would again take the markets to the average

PE levels of 16-17. After that, the economic environment has to support the bulls in taking themarket again to the optimistic levels and to prevent them from going into a long period of

pessimism. It must be noted here that the current economic growth and corporate earnings

growth are mainly because of the huge stimulus packages and the asset price inflations. The

Indian economy now has to achieve growth in real demand which is a difficult task.

Many analysts are of the view that the worst is still ahead for the global economy. The root cause

of the current crisis has been the leverage problem and liquidity driven asset price inflation and

none of these problems have been solved so far. The stimulus packages announced by the

governments are actually worsening the situation.

How Long will it Last?


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The period and level of sustainability of the current optimism is perhaps dependent on the

continuing flow of FII (hot) money into the markets. Once the liquidity in the global economic

system tightens or the developed economies find better yielding investment avenues in their

system, it would lead to quick withdrawal of money from the Indian markets. This would ultimately

create euphoria in the markets leading to huge correction. Emerging economies, like India, have

still a long way to go for completely decoupling themselves from the developed international

markets.

Reference # 6M-2009-11-03-01.

Asian Capital Markets Integration

-- Tamal Datta Chaudhuri

Chief General Manager,

Industrial Investment Bank of India Ltd. (IIBI), Kolkata.

-- Rituparna DuttaFreelancer, Columnist.

This article seeks to examine the extent to which stock markets in Asia are interrelated. The

analysis shows that the markets have increasingly become more sensitive to international financial

flows. In that sense they have got integrated with the rest of the world.

One of the reasons for the present worldwide slump in stock markets and other asset markets is

"global imbalance". Briefly, this is an observed phenomenon where the eastern part of the world is

saving more than its investments, whereas the western part of the world, US in particular, is

investing more than its savings. The excess savings in the east is funding the excess spending of

the west which has made the state of savings of the east extremely sensitive to market conditions

in the west. It has been suggested that a way out of this is to create investment opportunities in

the east itself and together this part can grow faster. This is, of course, not to say that the eastern

part of the world should cut itself from the western countries.

To examine the opportunities in the eastern part of the world that will benefit this group of

countries, one has to take stock of the current state of interdependence. This would cover inter-

country flow of goods and services, inter-country flow of savings and investment, movement of

labor, mergers and acquisitions, market size and political and social conditions. However, our

limited purpose here is to examine the extent to which stock markets in this part of the world are

interrelated.

Figure 1 depicts the relationship between the following stock market indices: BSE Sensex, Kuala

Lumpur Composite, Strait Times, Shanghai Composite, Hang Seng and Seoul Composite. The time

period is 24.9.2007 to 18.2.2009. Figure 1 reveals that the indices are indeed related. They have

all fallen in this market downturn in the last one year.

Although the pattern observed in Figure 1 in all the stock market indices may look similar, each

country has its own characteristics and unique behavior pattern of its savers and investors. Each

country also has its own set of financial institutions and rules and regulations which affect market

behavior. This, we feel, should get reflected in volatility in market returns. This is shown in Figures

2 and 3. Figure 2 indicates that over the time period under consideration, volatility has increased

in all the markets. This implies that these markets have increasingly become more sensitive to

international financial flows and in that sense have got integrated with the rest of the world.Among these indices, Figure 3 shows that if we split the time period into bull and bear periods and


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look at periodic volatility, the Sensex and the Shanghai Composite are relatively more volatile than

the other indices. This is a reflection of the fact that India and China are the most happening

countries and financial capital has moved significantly into these countries in recent times. The

next volatile index returns is the Hang Seng.

We now turn to measures of interdependence and in this regard, Table 1 gives the extent of

correlation of volatility of Sensex returns with that of the other indices for the years 2005-06,

2006-07 and 2007-08. Three observations can be made. First, the extent of correlation between

volatility of the Sensex and the Shanghai Index has not been high and has fallen over the years.

Second, the correlation with Seoul Composite, Strait Times and Hang Seng has been high andpositive over the years. However, with Seoul the relationship has gone down, whereas that with

Strait Times has increased. Third, the correlation with Kuala Lumpur Composite has increased and

is positive in 2007-08.


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Although the discussion establishes the extent of association, it does not establish any causal

relationship. For this, we now present the results of Granger causality tests that we performed

with the index returns for the period from March 2005 to September 2008. The objective is to see

whether the movement in the Sensex returns is caused by index returns of other Asian equity

markets. The regression results and the inferences drawn are given at the end of each of the

tables.

From Table 2 we get the value of F (3,908) = F(3, a) = (1.37, 2.08, 2.60, 3.78 at various levels

of significance). As F-value is more than the critical value at most levels of significance, it can be

said that Hang Seng Granger causes Sensex.

From Table 3 we get the value of F (3,908) = F(3, a) = (1.37, 2.08, 2.60, 3.78at various levels

of significance). As F-value is more than the critical value at all levels of significance, it can be said

that Sensex Granger causes Hang Seng. Thus, with respect to the Sensex and the Hang Seng, a

two way causality has been established.

As the F-value is less than the critical value at all levels of significance, it can be inferred that

Kuala Lumpur Composite does not Granger cause Sensex (Refer Table 4).


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As the F-value is less than the critical value at all levels of significance, it can be inferred that

Sensex does not Granger cause Kuala Lumpur Composite (Refer Table 5). We can thus infer thatthere does not exist any causal relationship between the movement in the returns of the two

indices.


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that Seoul Composite Granger causes Sensex returns.


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of significance). As F-value is less than the critical value at almost all levels of significance, it can

be said that Sensex does not Granger cause Seoul Composite. In this case a one way causality has

been established.


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As the F-value is less than the critical value at all levels of significance, it can be said that

Shanghai returns does not Granger cause Sensex returns (Refer Table 8).

As the F-value is less than the critical value at all levels of significance, it can be said that Sensex

returns does not Granger cause Shanghai returns (Refer Table 9). The above analysis shows that

there does exist any form of causality between these two index returns.


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of significance). The F-value suggests that the causality can be established at 10% level of

significance.


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that Strait Times returns Granger causes Sensex returns.


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The article presents a methodology of analyzing relationship between stock market movements

and index returns in Asian stock markets. Our results show that there is indeed some relationship

between these markets and financial sector players should take these relationships into cognizance

while making portfolio decisions.

Reference # 6M-2009-09-03-01.

Documents

Indian Equity Markets