A Study on the Spill Over Effects on Nifty 50 Returns: Evidence from Stock Market Performances of Major Asian Counterparts of India

Abstract

This study investigates the spillover effects of major Asian stock market performances on the returns of the Nifty 50, India's benchmark index. Employing advanced econometric techniques, we analyze the dynamic relationships between the Nifty 50 and key Asian counterparts, considering both short-term and long-term horizons. Our research delves into return spillovers aiming to comprehensively assess the interconnectedness and transmission of market movements across the region. This study utilizes an extensive dataset covering Nifty 50 returns from April 1, 2013, to March 31, 2023, along with meticulously documented returns from stock market indexes linked to major strategic alliances in India. By applying advanced multivariate time series analysis techniques, encompassing Vector Autoregression (VAR), Granger causality tests, and impulse response functions, we model the intricate dynamics interweaving these indexes with the Nifty 50. The research endeavors to answer fundamental questions, including assessing short- term and long-term effects resulting from major Asian counterparts of India on Nifty returns, as well as exploring noticeable patterns that indicate the direction of causality between these counterparts and Nifty returns. The outcomes of this study carry substantial implications for decision-makers. Investors can make more informed decisions, businesses planning strategic partnerships can refine their strategies, and policymakers can formulate economic and financial regulations that accurately reflect the complexities of these dynamics. By unveiling the ripple effects of these counterparts on the Nifty 50, this research offers valuable insights into the evolving dynamics of India's financial markets and their integration into the global economy.