Investigating the relationship between Nifty and selected Global stock market indices

Abstract: Since the Indian economy is expanding and its financial markets are becoming more integrated into the global economy, it is critical to examine the established relationship of the securities market of India, which is represented by the Nifty index, and major global securities indices. This research investigates the dynamic correlations and causal relationships between the Nifty and a selection of global indices, including the Dow Jones Index (USA), Nikkei250 (Japan), FTSE 100 (UK) index, Hang Seng (Hong Kong) index, Shanghai Composite Index (China) index, and CAC 40 (France), using daily closing prices from January 1, 2010, to December 31, 2023. We take the closing prices of this index and estimate the daily average return of all indexes. To achieve these objectives, we used various statistical techniques such as correlation analysis, descriptive statistics analysis, and regression analysis. The findings reveal that the Dow Jones and Nifty were the top-performing global indices, while the FTSE and Hang Seng were the lower-performing indices. The Nikkei and CAC40 exhibited higher volatility, whereas the FTSE and Dow Jones displayed lower volatility. The findings will help international portfolio investors manage risk more effectively through diversification and hedging strategies. Understanding the transmission mechanisms for financial shocks allows regulators to coordinate monetary/fiscal policies with major economies to stabilize investor confidence domestically.

Keywords: Nifty, Global Indices, Stock Markets, Correlation, Regression Analysis