Correlation Analysis of Indian Stock Market with International Markets
Autor: goude2017 • February 17, 2018 • 1,048 Words (5 Pages) • 846 Views
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Period 2
In period 2, The RTS Index had seen a peak and also a very heavy drop. But at the same time, SENSEX did not show so much variation as shown by Russian stock exchange. In year 1997, the Russian stock exchange crashed. The event started with collapse of one of the largest bank in Russia and, for the first time ever, a country defaulted on its government securities. Then the political environment became volatile, which led to the ouster of Boris Yeltsin and then Putin came to power. SENSEX again moved in a range but showed much higher volatility than the previous period. The coefficient of correlation for this period is 0.3854.
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Period 3
Period 3 saw reversal of roles of earlier period. SENEX went up and reached a peak and then came down whereas the Russian stock exchange remained stagnant. NSE rose because of tech boom till mid of 2000. Subsequently it collapsed and went back to its level of 1998 in the year 2001. Till 2003, SENSEX remained at the level that it attained in the year 1998. But volatility was much higher in this period. The coefficient of correlation for this period is 0.4638.
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Period 4
During period 4, both the exchanges rose sharply and moved in an almost identical fashion. Correlation is also very high during this period (0.9695). This shows a lot more integration of two markets with each other.
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India (SENSEX) and USA (NYA)
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Period 1
Led by the tech companies, the US economy was at its pink which is reflected in the NYA Index. But the SENSEX did not appreciate much. The correlation coefficient for this period is 0.0185.
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Period 2
In the USA, the tech boom was saturating. Owing to the tech bubble burst and slow global recovery from recession, both NYA and SENSEX decreased. The coefficient of correlation was 0.5557.
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Period 3
The high dependence of India on the US in trade was reflected in period 3. During this period, both the stock exchanges had risen sharply. Although the percentage change in the SENSEX was much larger, but the manner in which they were moving was highly correlated (coefficient of correlation is 0.9882).
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India (SENSEX) and Hong Kong (HSI)
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Period 1
Period 1 shows that there is almost no correlation between these two exchanges. HSI was rising very sharply because of the East Asian miracle. Whereas India, not part of this success story, remained almost untouched by this boom. SENSEX is almost constant during this period. The coefficient of correlation for this period is 0.0460.
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Period 2
During period 2, HSI crashed 50 percent and then rose back 100 percent. Thus, it showed very high volatility during this period. SENSEX also rose during this period because of pervasive tech boom but the rise was not as spectacular as HSI. HSI might also have risen sharply because of its previous low levels. The coefficient of correlation for period 2 is 0.7170
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Period 3
HSI was falling steadily; showing a downward trend. This might be due to the fear of global recession. But the SENSEX was not much affected. The coefficient of correlation for period 3 is 0.5507
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Period 4
During Period 4, SENSEX was rising in almost identical manner with the HSI. This shows the larger integration of the Indian economy in the foreign market. This might also be due to the fact that this boom was led by FII and other foreign investors. Hence, SENSEX is showing higher correlation during this period (Coefficient of correlation is 0.9688).
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