Comparative Analysis of Indian Stock Market with

International Markets

Sukhmander Singh1, Deepak Kumar2

1Student of M.Com (Finance) 2016–2018, Baba Farid Group of Institutions, Deon, Bathinda
2Student of M.Com (Finance) 2016–2018, Baba Farid Group of Institutions, Deon, Bathinda
ABSTRACT
The activities at the stock market have increased and so are the international activities. The importance of these
activities is also increasing at the global level. This paper has been prepared with the intention of capturing the
global trends and patterns and the simultaneously flow of the global stock market, as the Indian stock market
has been integrated with the world’s top stock markets. For the purpose of the study, the stock markets and
exchanges covered hereby are of I nd ia, U S A , China,Ta iwan , Japan,Ho n g Kon g ,So uth Ko rea a nd U K
during postglobalfinancialcrisisperiod. All these stock markets have their own history, trends and
political and social background. For the purpose of studying the integration of the Indian Stock market with
these international Stock exchanges, we include the National Stock Exchange and the Bombay Stock Exchange.
The Time Period taken in this study is from31st January 2014 to 31st January
2 0 1 8 basedon dailyclosingpricesofstockma rketindicesforallth e sel ec ted co u n t ri es .

I.INTRODUCTION
Since the LPG reforms, 1990-91, the Indian Stock Market and the International capital markets have faced
lots of changes.India followed the policies of LPG to remove the trade barriers among the international
stock markets.This thing has widened the scope for the Indian Capital Market. The LPG reforms have
made the international market a local market for India. The main reasons of doing this study are
th e internationalfinancialcrisis int her ecent p er io d s c a u s e d b y lo calized crisessu c h ast heco llap se o
f R u s s i a n b o n d mar ket, theAs ia n financialcrisis,a nd thever yrecentU S financialcrisis.However,
th e i n t e g r a t i o n o f t h e m a r k e t depends upon the p articipants. T hey all must fo llo w the same
p arameters o f the valuating the financial instruments. The all p articipants sho uld be treated
eq ual in the mar ket.T here are numb er o f barriers in the internatio nal stock market as
tariffs, ta xe s,r es tr i ct io n o n t r a d i n g i n f o r e i g n a s s e t s ,
i n f o r m a t i o n co s t w h i c h h i n d e r s t h e f r e e f l o wo f c a p i t alf r o m o n e m a r k e t t o ano ther. So, with the
integration of the market, the foreign investors can invest in the domestic market and the domestic
investors can invest in the foreign markets.
Indian Stock Market
Since the LPG reforms, the Indian Stock Market has undergone a huge change. Along with that the
International Stock Market has also changed. To meet the standard of the International Markets,

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the Indian Markets i.e. NSE and BSE has als o achieved the global standards. Introduction of
electronictradingsystem,rollingsettlementintheplaceofthe a c c o u n t p erio d settl e ment, in crea se i nt
rad ingho u rs, d e mater ializatio n o f s har es, rep lace me nt o f carr yfo r wa r d tradings y s t e mb y i nd e xb a
s e d a n d script-
b a s e d futuresand options,adoptionofriskma n a ge me nt thro ughmotivationattheclearingcorporatio
netc. has globally standardized the Indian Stock Market. The advancement of the technology has
increased the access of the investors to the market and also the transparency has increas ed.
Liberalization has been allowed in the Indian Stock Market by
allowingportfolio investment fro m foreigninstitutionalinvestors(FIIs)inthefo r mo fp e n s i o n fu n d s ,
m u t u a l fu n d s , i n v e s t m e n t tr usts e t c . s i n c e LP G
r e fo r ms . A l s o Indianinvestorshavealsobeenallowed totaptheforeignmarketwith globaldepositoryr
eceipts(GDRs), Americandepositoryreceipts(ADRs) andforeigncurrencyconvertible b o n d s ( F C C B
s ) . Because of this thing, the integration of the Markets has taken place. So this Paper is
studying that integration level of the Markets at global level.
R e v i e w o f Lit era t ure

Sa ra t Dha l ( 2 0 0 9 ) u s e d mul ti v ar i ate co - i n te gr atio n a n al ys i s o f sto c k p rice s i nd i ce s o f

glo b al ma r ket s o f t h e U S, t he UK a nd J ap a n , H an g Ka n g S i n gap o r e Ind ia o ver t h e p erio d
co v er s Ap ri l 1 9 9 3 to J ul y 2 0 0 9 . T h e re s ul ts s ho w t ha t t he se ma r ket s s hared si n g le co -
in te gr at io n r e la tio n s hip and I nd ia n S to c k ma r ke t p la yed t he k e y ro le.

Sri n iv a sa Ra o Ga ng a d ha ra n & C. A Yo o n u s ( 2 0 1 1 ) e xa mi n ed t he i m p act o f t h e g lo b al

fi na nc ia l cr i si s o n t h e l ev el o f f i na nc ia l i n te gr a tio n b et we e n t h e US( S & P 5 0 0 ) a nd I nd ia n
sto c k ma r ke t ( C NX S & P ) u s i n g d a il y re t ur n s fro m Mar c h 2 0 0 5 to N o ve mb er 2 0 1 0 . T h e
st ud y fi nd s t h at t her e i s no co -i n te gr a tio n b et we en t he t wo i nd ice s.

A ma le nd u B h un ia & A mi t Da s (2 0 1 1 ) e xa mi n ed i n terd ep e nd e n ce b et we e n sel ec te d

So ut h – Ea st co u n tr ie s sto c k ma r ket s a nd I nd i an s to c k mar k et fo r t h e p er io d fro m 1 s t
Au g u s t 1 9 9 1 to 3 1 ST J u l y2 0 1 1 .t he o ver al l r es u l ts i nd ica te s a n i ncr ea se in t h e i nt e gra tio n
b et we e n So ut h Ea st mar ke t s a f ter g lo b a l fi n a nci al cr i si s.

K a na ka ra ja mma l & P a ul r a j ( 2 0 1 4 ) i n t he ir st ud y i n ve s ti ga ted s ho r t ru n a nd lo n g r u n

eq u il ib ri u m r el at io ns h ip b et we e n I nd i a n s to c k ma r ket wi t h U S A, C h i n a, S i n gap o re a nd
Ger ma n y. T h e d at a u se d i n t h e s t ud y fro m J a n uar y 2 0 0 3 to D ece mb e r 2 0 1 3 . T he st ud y
s ho ws co - i nt e gr a tio n e x is t a m o n g t he se lec ted ind ic es a nd al so fo u nd th at I nd ia n sto c k
ma r ket gra n g er ca u se o n U. S s to c k mar k et a nd b id irec tio n al ca u sa l it y e xi s t b et wee n
Si n g ap o re a nd I nd i a n S t o ck mar ke t.

K a na ka ra ja mma l & P a ul ra j ( 2 0 1 5 ) i n t he ir st ud y e mp iri cal l y i n v es ti ga ted t h e co -

mo ve me nt r ela tio n s h ip b et we e n U S, C hi n a a nd I nd i a n s to c k ma r ket i n t h e p o st r e fo r m era .

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T he d a ta e mp lo yed i n th e s t ud y J a n ua r y 1 9 9 1 to De ce mb er 2 0 1 3 . t he s t ud y fi nd s t h at
Ind ia n sto c k mar ke t i s no t co -i n te gr a ted wi t h c hi n a a nd US mar ke t s. T he I nd ia n mar ke t
in fl ue n ce s t h e c h i na ma r ke t.

A ma n Sr iv a st a v a ( 2 0 1 5 ) u si n g t he t i me ser ie s glo b al i nd ic e s d at a ra n gi n g fro m J a n uar y

1 9 9 2 to Ap r il2 0 1 4 us i n g U S , J ap a n , S i n gap o re ,Ho n g Ko n g a nd I n d ia a nd t h e st ud y
s u g ge st s t he p r e se n ce o f str o n g lo n g t er m i n te gra tio n b u t t h e ab se n ce o f s ho rt ter m
in te gr at io n o f I nd ia n sto ck mar ke t s wi t h g lo b a l ma r ket s.

Sh iv i K ha nna ( 2 0 1 6 ) e xa mi n ed t he p ri ce b e ha vio r o f I nd ia n sto c k ma rke t wi t h U K a nd

J ap an s to c k mar k et p r io r and p o st g lo b al fi na n cia l cri s is a nd co nc l ud e d tha t d uri n g t he
p re -cri s is p e r io d b o t h j ap a n a nd UK ma r ke ts a re i nte g rat ed wi t h I nd i a n mar k et, wh i le i n
p o st cri s is I nd ia n mar ke ts wer e i n f l ue n ced b y U K s to c k mar ke t ,b u t no t b y J ap a n mar k et.

Need of the Study

The International Market has now become a mutual platform. The different players from different backgrounds
and countries are now in common market. The International Market is affected by different Markets of different
countries. The influence of one market over the other plays the vital role. 9/11 attacks on Trade Towers affected
the American trade. But the impact was on global level. The local markets of various countries were also
affected directly and indirectly. Therefore, here we are studying the impact of different markets and the
comparative study of the different markets. Hereby, the analysis of international stock market indices and
correlation exists between the markets is studied.

Scope of Study

The following research is studying the stock markets and exchanges of

India, U S A, China,T aiwan, Japan,H o n g Ko ng, So uth Ko reaand U K .
The Time Period taken in this study is f r o m 3 1 s t J a n u a r y 2 0 1 4 t o 3 1 s t J a n u a r y 2 0 1 8 .
Basis of the study is dailyclosingpricesofstockmarketindicesforallt he se lec te d co u n tri es .
Objectives of the Study

To know the impact of the integration Indian stock market with that of major global stock market. The analysis
of the impact is based on following:

1. Analyzing the co-relation of the various selected countries’ stock market.

2. To study the Daily trends in the International Stock Markets through their indices.
3. Analysis of co-relation in long run.

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Research Methodology

The method of collecting the data used here is the secondary. The above listed and the following data is
available on the various stock exchanges of the different
countries.Themethodologyofthestudyprimarilyincludesanalyzingtrendmovements. To represent the US stock
market, main indices S&P 100, BSE SENSEX and NIFTY for India, FTSE 100 for UK, KOSPI for South Korea,
NIKKIEI for Japan, Hand Seng for Hong Kong, TSEC for Taiwan and SSE for China.

The following methods are used for analysis.

1. Descriptive Analysis of Value of Stocks.

2. Graphical analysis of price indices.
3. Correlation between the different stock indices

Analysis and Findings

Data: World’s Major Stock Exchanges (Asia, Europe and America)

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1. Descriptive Analysis

Table 1: The Value of Stocks of World’s Major Stock Exchange Markets

Country Stock Exchange Indices Name Value of Stocks

India National Stock Exchange S & P Nifty 1,450

India Bombay Stock Exchange Sensex 1,482

Honk Kong Hong Kong Stock Exchange Hang Seng 3,165

USA New York Stock Exchange NYSE 18,486

USA Nasdaq Stock Exchange NASDAQ 7,449

China Shenzhen Stock Exchange SZSE 3,424

China Shanghai Stock Exchange SSE 4,460

Korea Korean Stock Exchange KRX 100 1,265

Japan Japan Exchange Group Nikkie 4,910

UK London Stock Exchange FTSE 3,272

Taiwan Taiwan Stock Exchange TAIEX 750

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The highly valued Stocks in the world are of New York Stock Exchange, followed by the other American Stock
Exchange called NASDAQ, which clearly justifies the dominant position of America in the International Stock
Markets. Among the above listed stock exchanges, Indian Stock Exchanges, Bombay Stock Exchange and
National Stock Exchange lies on 8th and 9th position respectively. Korean Exchange is on 10th position and the
last position is of Taiwan Exchange.

Table 2: The Indices of the Major Stock Exchange Markets

Stock Exchanges 2014 2015 2016 2017 2018

S & P Nifty 6,090 8,809 7,437 8,641 11,069

Sensex 20,513 29,182 24,870 27,655 35,965

Hang Seng 22,035 24,507 19,683 23,374 33,154

NYSE 9,967 10,537 9,427 11,283 13,637

NASDAQ 4,103 4,635 4,613 5,666 7,240

SZSE 2,202 3,434 2,946 3,388 11,160

SSE 2,033 3,210 2,737 3,159 3,558

KRX 100 4,175 4,022 3,633 4,221 5,344

Nikkie 14,914 17674 17518 19,467 23,808

FTSE 6,510 6,825 5,931 7,099 7,533

TAIEX 8,462 9,361 8,145 9,448 11,104

The rate of growth of the Indices of Shenzhen Stock Exchange of China is more than all other Stock Exchange
Indices. The indices of the SZSE in 2016 were 2,202 and now in 2018 it is 11,160. However, in current period,
Bombay Stock Exchange is leading the world’s top exchanges in case of Indices followed by Hang Seng
Exchange of Honk Kong. Korean based Stock Exchange KRX 100 is on last position in case of Indices.

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Table 3: Comparative Central Tendency of all the Stock Exchanges

Mean Median St. Deviation

S & P Nifty 8,409 8,641 1,845

Sensex 27,637 27,655 5,704

Hang Seng 24,551 23,374 5,134

NYSE 10,970 10,537 1,642

NASDAQ 5,251 4,635 1,248

SZSE 4,626 3,388 3,686

SSE 2,939 3,159 585

KRX 100 4,279 4,175 639

Nikkie 18,676 17,674 3,296

FTSE 6,780 6,825 605

TAIEX 9,304 9,361 1,153

The central tendency of the various Stock Exchanges’ Indices is measured in form of Mean, Median and
Standard Deviation. It is again lead by Bombay Stock Exchange, followed by Hang Seng. The lowest Mean
value is of Shanghai Stock Exchange of China.

2. Graphical Analysis

To show the movements of the indices of the selected countries stock markets, following graphical
presentation has been made.

Figure 1: The Value of the Various Stock Exchanges

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 Value of Stocks
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000 Value of Stocks
4,000
2,000
0

The above graph is showing the comparative level of values of the Stocks of different countries.

Figure 2: Co-movement of India’s Stock Indices with developed countries Stock Indices in the Period
2014-2018

40,000
35,000
30,000
25,000
2014
20,000
2015
15,000
2016
10,000
2017
5,000
2018
0

The comparative analysis of the Stock Indices of the world’s top Stock Exchanges has been
presented in the above graphical representation. The top position is of BSE, Hang Seng and
Nikkie. The rate of growth of the SZSE is shown here which is higher than others. The current
lowest position is of SSE, KRX 100and FTSE (UK Stock Exchange).

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 3. Co rre la t io n Ana ly si s
Table 4: Showing the C o r r el a t i o n b e t w e e n Ind ia ’s S t o c k Pri ce sw i t h o t h e r C o u n t r i e s ’
Stock Prices.

S&P Sense Hang NYS NASDA KRX Nikki

SZSE SSE FTSE TAIEX
Nifty x Seng E Q 100 e
S&P
Nifty 1 0.997 0.875 0.893 0.914 0.878 0.951 0.760 0.957 0.794 0.931
Sensex 0.997 1 0.879 0.88 0.898 0.885 0.944 0.754 0.946 0.769 0.923
Hang Seng 0.875 0.879 1 0.968 0.883 0.951 0.693 0.964 0.862 0.878 0.975
NYSE 0.893 0.88 0.968 1 0.956 0.933 0.735 0.961 0.920 0.923 0.984

NASDAQ 0.914 0.898 0.883 0.956 1 0.928 0.796 0.873 0.984 0.812 0.923
SZSE 0.878 0.885 0.951 0.933 0.928 1 0.694 0.921 0.922 0.734 0.912
SSE 0.951 0.944 0.693 0.735 0.796 0.694 1 0.536 0.872 0.682 0.801
KRX 100 0.761 0.755 0.964 0.962 0.873 0.921 0.537 1 0.809 0.872 0.927
Nikkie 0.957 0.947 0.862 0.92 0.985 0.922 0.872 0.809 1 0.761 0.908
FTSE 0.794 0.769 0.878 0.923 0.812 0.734 0.682 0.872 0.760 1 0.937
TAIEX 0.931 0.923 0.975 0.984 0.923 0.912 0.801 0.927 0.908 0.937 1
The study of relationship between BSE Sensex and other selected indices indicates
that there is a significant relationship between BSE Sensex and other world major indices. In
all the cases correlation is significant at 1% level of significance, indicating that strong
integration of Indian stock market with major world markets in the post global financial
crisis. The correlation of Indian stock market is weak with KRX 100, Korean Stock Market
and strong correlation with China, Japan and Taiwan Stock Markets. However, no
conclusion can be drawn on the basis of analysis of correlation and thus, high
significant correlation warrants a detailed study to find whether the phenomenon is short
lived or is valid in the long run as well. Granger causality and co integration techniques need
to employ to be check the correlation results further for analysis of short run and long run
effects respectively.

II.CONCLUSION

The results of this study strongly support the view that, there is a substantial integration between Indian and
International financial markets. BSE-Sensex has witnessed a greater fluctuation which has been indicated by a
very high Co-efficient of variation compared to other select indices. Sensex, the Indian bench mark index, has
shown strong association with China, Japan and Taiwan’s Composite Index. The study reveals that, there is a
poor integration of BSE- Sensex with NASDAQ and KRX 100. Indian stock market exhibited strong positive
correlation and perfect price correlation with global stock markets. In Asia pacific region, when compared to

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Hang Kong, correlation of the Indian market with global markets is not so attractive. Chinese stock index i.e.,
SSE Composite index has exhibited strong correlation with BSE- Sensex and with Hang Seng. Japanese stock
index i.e., Nikkei225 has strong integration with world major stock markets. It has strong correlation with all the
select indices. The European index i.e., FTSE100 has exhibited strong correlation with all the US stock market
indices and with Nekkei225, the Japanese stock market index.

The growth of the Indian economy has been noticed in recent years. The same thing has been
witnessed in the Stock Market trends.

T h e s t u d y c o n c l u d e t h a t I n d i a n s t o c k m a r k e t w h i c h h a s l i n k e d w i t h s t o c k ma rkets ofalltheco untri

esisgloballyintegrated o v er thenext1 0 to1 5 years,ne ed to m o v e to ward s fargreaterintegrated glo b al
financialwo r l d a n d p olicyma k er s inIndia n e e d to reth ink t he fr a m e w o r k fo r s u c h integratio n.

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