“Sectoral Indices Movement: A Study of

Financial Crisis Era”

Abstract

The paper attempts to examine the movement of

sectoral Indices of India before, after and during the
era of global financial crisis 2007-09. It is intended to
examine the changing risk-return dynamics of Indian
economy especially for the said period. Changing risk-
return dynamics will reveal the impact of global
financial crisis on Indian economy and result thereof in
the after crisis period. It covers daily return data of ten
sectoral indices and S&P CNX Nifty for the period 2005
to 2011 which is further sub-divided into three periods:
before crisis (April 2005 to November 2007), during
crisis (December 2007 to June 2009) and after crisis
(July 2009 to March 2011). Descriptive statistics, paired
t-test and stepwise regression have been used for data
analysis and presentation. The results indicate that the
major impact is on sectors like IT and
Infrastructurestructure taking economy to restrictive
growth run.
Keywords: risk-return dynamics, sectoral indices
movement and global financial crisis

Introduction

The global financial crisis happened in the mid of 2007

and caused a huge impact on financial markets and
institutions around the world. The bursting of the
housing bubble in a number of countries, the subprime
financial crisis in the United States, rising commodity
prices, and, restrictive monetary policies led the global
economy to the “brink of recession” in the first half of
2008 particularly in several countries (TDR 2008: 1)[1].
The IMF’s Global Financial Stability Report 2006
warned that the rapid expansion of household credit
“can compound the problems of excessive
consumption, current account imbalances, and
property boom-bust cycles. If credit is predominantly
financed by external capital flows, it can heighten the
vulnerability to sudden stops and financial crises” (IMF,
2006: 69)[2]. What makes this crisis exceptionally
widespread and deep is the fact that financial
deregulation, “innovation” of many opaque products
and a total ineptitude of credit rating agencies raised
credit leverage to unprecedented levels. Blind faith in
the “efficiency” of deregulated financial markets led
authorities to allow the emergence of a shadow
financial system and several global “casinos” with little
or no supervision and inadequate capital requirements.
[3]

In the 17th meeting of IMF 2008, P. Chidambaram, the

then minister of finance, Indi stated that the
immediate fallout of the financial crisis was reflected in
a reversal of the robust trend of global growth during
2008. The year 2008 had been highly turbulent for the
world economy which had been hit hard by a profound
financial crisis. The problems in financial markets
turned into a full blown crisis in September 2008, the
growth of gross domestic product (GDP) had ground to
a halt in most developed countries. Table 1 shows the
annual growth rate of various countries of the world
including the world annual growth rate.

Table 1: showing annual growth rate of various

countries of the WORLD

Country Name
2002

2003

2004

2005

2006

2007

2008
2009

2010

World

1.98

2.69

4.09

3.55

4.05
3.98

1.44

-2.31

4.22

Japan

0.26

1.41

2.74
1.93

2.04

2.36

-1.17

-6.29

4.00

India
3.77

8.37

8.28

9.32

9.27

9.82

4.93

9.10
8.81

China

9.10

10.00

10.10

11.30

12.70

14.20
9.60

9.20

10.40

UK

2.66

3.52

2.96
2.09

2.61

3.47

-1.10

-4.37

2.09

United States

1.83
2.50

3.59

3.06

2.67

1.94

-0.02

-3.50
3.00

France

0.93

0.90

2.54

1.83

2.47

2.29
-0.08

-2.73

1.48

Germany

0.01

-0.38

1.16

0.68
3.70

3.27

1.08

-5.13

3.69

Hong Kong

1.84
3.01

8.47

7.08

7.02

6.39

2.31

-2.66

6.97
Singapore

4.24

4.60

9.24

7.38

8.70

8.77
1.49

-0.77

14.47

Source: World Bank fil

It can be seen from table 1 that annual growth

rate of the world fell from 3.98 in 2007 to 1.44 in 2008
and -2.31 in 2009. In the period 2008-09, many
countries were found in the grip of recession. For
example, US GDP growth rate fell from 1.94 in 2007 to
-0.02 in 2008. Similarly India’s GDP growth rate fell
from 9.82 to 4.93, China’s GDP growth rate fell from
6.39 to 2.31, Japan’s GDP growth rate fell from 2.36 to-
1.17 and UK’s GDP growth fell from 3.47 to-1.10. This
reflects that almost all countries had experienced a
sharp slowdown of economic growth in mid- 2008. This
crisis was unique, not only in terms of its depth but
also in the extent of its global reach: virtually no
economy has remained unaffected. Even economies
that were expected to grow in 2008-09, such as those
of China and India, were slowed down significantly
from their previous years of rapid growth.[4]

Various studies had been conducted to check the

impact of this global meltdown on different economies
by various stakeholders, researchers and academicians
under different times. Angabini and Wasiuzzaman
(2011) investigated the volatility of Kuala Lumpur
Composite Index (KLCI) with regards to the financial
crisis of 2007-08. For this, two different periods were
selected-without crisis period and with crisis period. It
was found that volatility was relatively consistent from
2001 to the year 2007 and increased in the middle of
2007 till 2009. Cocozza, Colabella and Spadafora (2011)
found the adverse impact of global crisis on six south
eastern European countries as their exports declined,
external debt and Trade deficit increased. Adamu
(2009) revealed that financial crisis lead to fall in
commodity prices, decline in export, lower portfolio,
and fall in FDI inflows and equity markets in the
Nigerian economy.

While the developed World, including the US, the

Euro zone and Japan had plunged into recession, the
Indian Economy was being affected by the spill-over
effects of the global financial crisis (Chidambaram,
2008). India started its globalization in 1992 and since
then Indian economy integrated with the World
economy. As a result, Indian economy was not isolated
by freezing of stocks and downsizing in the World
economy. As honorable Prime Minister, Dr Manmohan
Sing pointed out that “A global Financial Crisis of this
magnitude was bound to affect our economy and it
has.” The global stock markets, after a sustained bull
run of almost four years, have behaved erratically since
the beginning of 2008. Indian indices fell sharply
accompanied with a high degree of volatility when the
sub-prime crisis hit the global markets. Sensex, an
economic barometer of Indian economy dropped from
21,000 to less than 10,000 points which was by or large
due to global slowdown wave. As per the data
collected from file of preview grid of World Bank, the
year 2008 reported the lowest growth rate of 4.93 in
India. It reflects that the financial crisis had put an
adverse effect on Indian Economy. A number of studies
had been conducted to know the effect of financial
crisis on India. Aziz (2010) studied the effect of global
recession on various macroeconomic variables and
found that the most immediate effect of that crisis on
India has been an outflow of foreign institutional
investment from the equity market. It was also found
that both exports and imports of India slowed down in
2008-09 but decline in growth of exports during that
period was sharper than the decline in growth rate of
imports. Bera (2010) empirically examined the impact
of current world- wide recession on India’s growth by
applying regression technique, by taking GDP as
dependent variable, and exports, imports, FDI and FII
as independent variables. All the variables were tested
for stationarity first by using Augmented Dickey-Fuller
(ADF) test. The results pointed out that financial crisis
had adversely affected India’s GDP although imports,
exports and FDI were found to have exercised
stimulating influence through technological spillovers
and other externalities. Khan and Mehtab (2010)
studied the same by studying the effect of crisis on
exports, import and foreign reserves. For this, T-test
had been conducted. It was found that global recession
had an impact on Pre and Post Export Earnings as well
as Import Earnings of the country. The Student T-Test
also figured the adverse impact of the recession on
foreign reserves. Kundu (2008) focused on the impact
and analysis of the global financial crisis on India’s
financial market and the real economy. The impact of
crisis was seen through slower GDP growth,
depreciation of rupee, high inflation and lower FII
investment and foreign exchange reserves. The same
findings had been supported by Kumar and Vashisht
(2009) and Vidyakala, Poornima and Madhuvanthi
(2009).

Many studies had been conducted to know such

adverse impact by having sectoral analysis in order to
know its magnitude and direction. Kaur (2010)
analyzed the impact of recession on various sectors of
Indian economy during 2000-01 to 2009-10. The results
found that major impact was seen on fall in growth
rate of IT sector, decreased in FDI, exports and imports
of the Indian economy. Beside this, the factor causing
recession had also been studied using multiple
regression technique by taking GDP as dependent
variable and production of IT sector, FII and FDI as
independent variable. It was found that these factors
had influence on GDP as the model explained 99.10
percent of variation. Rao and Naikwadi (2010)
examined the impact of global financial meltdown on
beta of selected companies by using average,
percentage and Karl Pearson correlation method. He
concluded that Banking, cement, automobile, steel and
Infrastructure sectors were badly affected by global
financial meltdown. However, a small impact was
found in FMCG and retail sector. Similarly, Prasad and
Reddy (2009) found adverse affect on sectors like IT,
FII, Banking, Infrastructure and exports. Vidyakala,
Madhuvanthi and Poornima (2009) found the adverse
effect on banking sector.

Where as Jeeyanthi, William and Kalavathy (2012)

empirically examined the impact of global financial
crisis on Indian stock market return and volatility
during April 2005 to March 2010. They applied T-test,
Binary regression test, wilcoxon rank sum test and
Kruskal-wallis H-test to examine the short term and
long term impact on the return of Indian stock market.
Parkinson model, Garman and Klass model and GARCH
model were used to know the impact of crisis on
volatility of Indian stock market. The results concluded
that financial crisis had no significant impact on Indian
stock market return and volatility. The overall findings
of different researches related to impact of global crisis
on different economies are summarized in table 2.

Table 2: summarized review of literature

Research study
Objective

Tools

Results

Impact on sectors

No impact

Angabini and Wasiuzzaman (2011)

To investigate the volatility of Kuala Lumpur Composite

Index (KLCI) with regards to the financial crisis of 2007-
08
Descriptive statistics, ARCH and GARCH (1,1), EGARCH
(1,1). GJR-GARCH(1,1) models

volatility was relatively consistent from 2001 to the

year 2007 and increased in the middle of 2007 till 2009

Cocozza, Colabella and Spadafora (2011)

To found the impact of global crisis on six south

eastern European countries

Tabular presentation

Exports declined, external debt and Trade deficit

increased
 Adamu (2009)

To examine the influence of the Global Financial Crisis

on Nigerian economy

Theoretical explanation

Fall in commodity prices, decline in export, lower

portfolio and FDI inflow, fall in equity market, decline
in remittance from abroad

Bera (2010)
To examine the impact of current world- wide
recession on India’s growth

Regression analysis, testing for stationary and ADF test

Slower growth of India’s GDP , imports, exports and FDI

Khan and Mehtab (2010)

To develop an understanding of the global recession

and To analyze its impact on the India economy by
studying various economic indicators

T-test
Adverse effect on Export, import and Foreign reserves
of India

Aziz (2010)

To analyze the effect of global recession on various

macroeconomic variables

Tabular presentation

Depletion in FII and foreign exchange reserves, slower

growth of export and import of India

Kundu (2008) and Kumar and Vashisht (2009)

To study the impact and analysis of the global financial
crisis on India’s financial market and the real economy.

Graphical presentation

Slower GDP growth, depreciation of rupee, high

inflation and lower FII investment and foreign
exchange reserves

Kaur (2010)

To analyze the impact of recession on various sectors

of Indian economy

Pictorial presentation, OLS and Stepwise regression

method
Adverse effect on IT sector, FIIs, FDIs, Exports and
imports of the Indian Economy

Prasad and Reddy (2009)

To investigate impact of crisis on Indian economy

Theoretical explanation

Adverse effect on India’s IT, FII, Banking, Infrastructure

and exports

Vidyakala, Madhuvanthi and Poornima (2009).

To investigate the effect of Global recession on various
sectors of Indian Economy

Pictorial presentation

Decline in India’s GDP, Exchange rate, Trade deficit, ,

Banking and Retail sector

Rao and Naikwadi (2010)

To examine the impact of global financial meltdown on

beta of selected companies

using average, percentage and Karl Pearson correlation

method
Adverse effect on Banking, cement, automobile, steel
and Infrastructurestructure sectors

Small effect on FMCG and retail sector

Jeeyanthi, William and Kalavathy (2012)

To empirically examine the impact of global financial

crisis on Indian stock market return and volatility
during the period April 2005 to March 2010.

T-test and Binary regression test, wilcoxon rank sum

test and Kruskal-wallis H-test, Parkinson model,
Garman and Klass model and GARCH model
No significant impact on Indian stock market return
and volatility.

The discussion above brings home the fact that

financial crisis had put an adverse effect on Indian
economy as examined by Bera (2010), Khan and
Mehtab (2010), Aziz (2010), Rao and Naikwadi (2010),
Kaur (2010), Vidyakala, Poornima and Madhuvanthi
(2009), Prasad and Reddy (2009), Kumar and Vashisht
(2009) and Kundu (2008). The impact had been found
out by studying adverse effect on various
macroeconomic variables like GDP growth rate,
exports, imports, FIIs and FIIs and sectors like Banking,
IT, Infrastructurestructure. It seems that few
researchers had attempted to know the impact of
financial crisis through sectoral indices risk-return
paradigm that could not be traced especially with
regard to Indian context.

The present study attempts to focus on sectoral indices

returns with regard to global meltdown in comparison
to post and pre financial era especially for India. Hence
it becomes imperative to have a discussion on Index.
An index is a tool which enables investors to measure
the performance of a group of stocks from a defined
market. As there are numerous indices, investors can
use them to compare their movement and have
directional analysis. Sectoral indices are considered as
lead indicator of the performance of a sector of an
economy. It could also help investors to minimize their
risk by using portfolio diversification strategies in order
to balance down those with high risk (high returns) are
balanced with those that are less risky (low returns).
Ali, Abdullah and Azman(2011) states that sectoral
indices serve as an indirect measure of the
performance of the economy when studied as a whole.
Therefore, the present study attempts to examine the
effect of crisis on Indian economy by studying the
various sectors of Indian economy by taking a sample
of ten sectoral indices of Indian economy with S&P CNX
Nifty.

Objectives of the study

The study focuses on the following objectives:

To examine the impact of global financial crisis on

returns of sectoral indices in comparison to post and
pre financial crisis era.
 To investigate which sectors are most affected by
global financial meltdown.
To know the effect of such changing sectoral
dynamics on S&P CNX Nifty in comparison to post and
pre financial crisis era.

Research methodology

Data

The data consists of daily closing prices of ten sectoral

indices and S&P CNX Nifty for the period 2005 to 2011
which is further sub-divided into three periods: before
crisis (April 2005 to November 2007), during crisis
(December 2007 to June 2009) and after crisis (July
2009 to March 2011 The daily closing prices have been
converted into return series using natural logarithm
tool. The data for the indices has been collected from
the NSE website www.nseindia.com for the whole
period.

Sample
Table 3 shows the sectoral indices of the Indian
Economy included in the sample selected for the study.

Table 3: Sectoral Indices included in the sample

Sr. No

Sector

Index

Symbol

Banking Sector
CNX Bank

Bank

Energy sector

CNX Energy

Energy

Finance sector
CNX Finance

Finance

FMCG sector

CNX FMCG

FMCG

IT sector
CNX IT

IT

Media sector

CNX Media

Media

Metal sector
CNX Metal

Metal

MNC sector

CNX MNC

MNC

Pharmaceutical sector
CNX Pharma

Pharma

10

Infrastructure sector

CNX Infrastructure

Infrastructure

Tools of analysis

In order to achieve the objectives, apart from

pictorial presentation and descriptive statistics,
multiple regression- stepwise regression and paired t-
test have been used.
Their discussion has been explained below:

a) Multiple regression – Stepwise regression

It involves the relationship between a dependent or

criterion variable (call it Y) and a set of k independent
variables or potential predictor variables (call them X1,
X2, X3,..., Xk), where the scores on all variables are
measured for N cases.

The regression model fitted to the data is

Yi = α 0 + βBank XBank + β Finance XFinance , +βEnergy

XEnergy + β FMCG X FMCG + β IT X IT + β Media X
Media + β Metal X Metal + β MNC X MNC + β Pharma X
Pharma + β Infrastructure X Infrastructure + u

Where,

Yi is the dependent variable (S&P CNX Nifty),

u is the error with mean zero.

A Step wise regression is designed to find the most

parsimonious set of predictors that are most effective
in predicting the dependent variable. It is a method of
computing OLS regression in stages. In stage one,
independent variable which is best correlated with
dependent variable is included in the equation. In the
second stage, the remaining independent with the
highest partial correlation with the dependent,
controlling for the first independent is entered. The
process is repeated at each stage partially for
previously – entered independents, until the addition
of a remaining independent does not increase R-square
by a significant amount (or until all variables are
entered). Kaur (2010) had applied the same test for
analyzing the factors causing recession.

b) Paired t-test

Paired t-test is used to investigate which sectors are

most affected by global recession. This test uses the
difference between each of the paired variables and
determines whether the result is statistically significant
from 0. Thus, it is the difference within pairs, not
between pairs, that is being tested. The form of the t-
test for paired measurements is:

Where: = Average of the differences between

the individual split sample test results

= The value of the expected difference between

split sample tests.

= Standard deviation of the differences between

the split sample test results

n = Number of split samples (matched pairs)

Empirical results

Effect of global financial meltdown on World Indices

Having started from the United States sub-prime
mortgage market, the financial crisis spread quickly,
infecting the entire United States financial system and,
almost simultaneously, spreading to the whole world
due to globalization. No market was spared from the
hit of global recession which had been depicted in
figure 1.

Figure 1: Effect of crisis on returns of World Indices

Source: Authors’ own work

Figure1 shows the effect of crisis on various stock

markets of the World. It is found that the most
affected Index is Dow Jones Industrial Average Index.
The reason behind this that Dow Jones is a barometer
of US economy, the birthplace of global meltdown.
Beside this, every economy is affected by crisis as
average return during the crisis period comes to
negative except JKSE. But its return fall down as
compared to pre and post financial crisis era. It implies
that crisis had affected all economies of the world. S&P
CNX Nifty which is the indicator of Indian economy is
also affected by financial crisis as its average returns
falls to negative during the era of global financial
meltdown. In the next section, the most affected
sectors of Indian economy will be studied.

Effect of global financial meltdown on returns of

Sectoral Indices of India

Almost all developing countries had experienced a

sharp slowdown of economic growth in mid- 2008 due
to financial crisis as evident from figure 1. It is found in
section-I that S&P CNX Nifty brought negative returns
during the same period. Table 4 shows the effect of
such meltdown on risk and return dynamics of sectors
contributing Indian economy under study.

Table 4: Descriptive statistics of returns of sectoral

indices

Sectors

Before crisis
During crisis

After crisis

Mean

Standard Deviation

Mean

Standard Deviation

Mean

Standard Deviation
Bank

0.001427

.020195113

-0.00064

.034053214

0.001063

.016224607

Energy
0.001586

.016527524

-0.00057

.028695262

0.000284

.011560448

Finance
0.001748

.019085576

-0.0008

.03437850

0.001004

.015621847

FMCG

0.00109
.016015263

-3.83e-06

.019324166

0.001033

.011299149

IT

0.00061*

.017139783
-0.00062

.028732918

0.001628*

.014003133

Media

0.001838

.019066629
-0.00197*

.028920771

0.000526

.014081982

Metal

0.002099

.028105069

-0.00132
.036742236

0.000868

.018858250

MNC

0.001325

.015089305

-0.00049

.021119839
0.000722

.010557829

Pharma

0.000602

.013816761

-0.00017*

.019077588
0.001251

.010115123

Infrastructure

0.002099*

.018184474

-0.0012

.030926535

-0.00032*
.013346589

Source: Authors’ own work

Table 4 shows the descriptive statistical returns of

sectoral indices of Indian economy under study. It can
be seen that mean returns of all indices are negative
during crisis period. The highest mean returns are
generated by Infrastructure sector in before crisis
period where as IT sector recorded lowest mean
returns in before crisis period and highest mean
returns in after crisis period. This indicates that IT
sector rehabilitates itself from the crisis situation in a
better way.

In during crisis period, pharma sector generated the

highest mean returns among all sectoral indices This
may be well-understood from the statement made Mr.
Ajit Kamat Managing Director, Arch Pharma labs, “We
don't see a slowdown in exports in the pharma sector.
Demand has been robust, thanks to the very nature of
the industry which is perceived to be the most
defensive and inelastic sector as far as demand is
concerned. "

In after crisis period all sectors show the positive

return except Infrastructure which may implies that it
takes time for Infrastructure sector to rehabilitate from
the crisis situation. Standard deviation, a measure of
total risk is also shown in table 4 which affirms that
during period of crisis, risk of all sectors increased but
it started diminishing when economy started reviving
from the crisis situation. Since standard deviation is a
measure of total risk, a detailed study, taking
systematic risk (beta), has been made in the next
section.

Effect of global financial meltdown on beta and

return simultaneously

Systematic risk is non-diversifiable risk that is influnced

by the extenal considerations. It is not peculiar to a
particular firm only but peculiar to whole economy.
Since financial meltdown had affected all economies of
the world, thus, in this section effect of global financial
meltdown on syatematic risk and return of sectoral
indices had been studied simultaneously.

Table 5 shows that systematic risk during the era of

global financial meltdown had been increased in every
sector under sample of Indian Economy and the same
sectors recorded downward trend in their returns. As it
can be seen from table 4 that return of all sectoral
indices became negative in financial crisis period. Thus,
every sector under sample of Indian economy faced a
situation of increased systematic risk and
simultaneously decline in their retuns, which reflects
adverse effect of global financial metdown on Indian
economy.

Table 5: Effect of crisis on beta and return of sectoral

indices

a)Effect on Bank sector

b) Effect on Energy sector

 c) Effect on Finance sector

d) Effect on FMCG sector

e) Effect on IT sector

f) Effect on Media sector

g) Effect on Metal sector

h) Effect on MNC sector

i) Effect on Pharma sector

j) Effect on Infrastructure sector

Study of most affected sectors by global financial

meltdown

Paired t-test is used to find out which sectors are most

affected by global financial meltdown. Through paired
t-test, one must able to find out the statistically
difference between the two paired samples. Here each
sector of one period is paired with the S&P CNX Nifty
of the same period.

Table 6: showing results of paired t-test

Before crisis t-stat (p-value)

During crisis t-stat (p-value)

After crisis t-stat (p-value)

Bank

-0.24613 (0.402831)

0.161132 (0.436037)

1.009974 (0.156533)

Energy

0.216893 (0.414179)
0.460487 (0.322714)

-1.23703 (0.108369)

Finance

0.617625 (0.268517)

-0.04095 (0.483679)

0.975628 (0.164894)

FMCG

-1.14798 (0.125694)
0.83703 (0.201549)

0.707481 (0.239822)

IT

-2.37822*(0.008838)

0.164419 (0.434744)

1.90619* (0.02864)

Media

0.54591 (0.292691)
-1.21494 (0.112569)

-0.3355 (0.368705)

Metal

0.865295 (0.193594)

-0.5924 (0.276968)

0.339557 (0.367176)

MNC

-0.74066 (0.229579)
0.440909 (0.329764)

0.069166 (0.472445)

Pharma

-2.48525*(0.006595)

0.630353 (0.26442)

1.184857 (0.118358)

Infrastructure

2.11686* (0.01732)
-1.00965 (0.156651)

-3.54728*(0.000216)

Source: IBM SPSS statistics 19

*values in brackets show the p-value

*values without brackets show the t-statistic results

*t-values are significant at 5% level of significance

Table 6 exhibits that significant results of t-statistic are

found only in three sectors, i.e. Infrastructure, IT and
pharma in before crises period. This implies that only
these three sectors are significant in period before
global financial meltdown. Results of during crisis
period show that none of the sector shows significant
results of t-statistic. This reflects that none of the
sector is having the significant difference with S&P CNX
Nifty as all sectors moved in same downward direction.
The mean returns of all sectors during this period is
found to be negative, thus, all sectors are affected by
global financial meltdown. In after crisis period, two
sectors show the significant t-statistic results, i.e.
Infrastructure and IT. Thus Infrastructure and IT sectors
are most affected by global financial meltdown. But the
Infrastructure is the most affected sector as its mean
return is found to be negative even after the period of
global financial crisis.

Effect of changing sectoral dynamics on S&P CNX

Nifty

In complex regression situations, when there is a large

number of explanatory variables which may or may not
be relevant for making predictions about the response
variable, it is useful to be able to reduce the model to
contain only the variables which provide important
information about the response variable. But deciding
which explanatory variables to include in the simpler
model is not always trivial. Thus, we need a general
methodology to select the `best' model for the
response variable. Here we have S&P CNX Nifty as
response variable and sectoral indices as explanatory
variables.
Table 7: showing results of step wise regression *

Before Crisis period

Beta (T-value)

R-square

During crisis Period

Beta (T-value)

R-square

After Crisis Period

Beta (T-value)

R-square

Step-1

Infra .826 (53.027)

.855

Infra .852 (74.013)

.935

Finance .724 (48.176)

.842

Step-2

Infra .638 (38.637)

IT .299 (17.067)

.910

Infra .498 (23.173)

Energy .415 (17.909)

.965
Finance .443 (25.851)

Infra .419 (20.849)

.921

Step-3

Infra . 329 (16.694)

IT .272 (20.860)

Energy .410 (19.899)

.951

Infra .442 (26.642)

Energy .352 (19.694)

IT .168 (16.950)

.980

Finance .390 (27.918)

Infra .357 (21.887)

IT .188 (16.174)

.950

Step-4
Infra .226 (12.612)

IT .246 (22.425)

Energy .359 (20.526)

Finance .187 (14.534)

.966

Infra .300 (21.609)

Energy .340 (26.696)

IT .140 (19.470)

Finance .174 (19.303)

.990

Finance .342 (30.920)

Infra .260 (18.972)

IT .172 (19.089)

Energy .236 (17.442)

.971

Step-5

Infra .188 (11.342)

IT .230 (22.879)
Energy .336 (20.995)

Finance .172 (14.688)

Fmcg .122 (10.298)

.972

Infra .266 (21.689)

Energy .309 (27.437)

IT .134 (21.522)

Finance .164 (21.094)

Metal .075 (11.671)

.993

Finance .318 (32.678)

Infra .237 (19.816)

IT .161 (20.598)

Energy .231 (19.772)

Fmcg .118 (12.303)

.978

Step-6

Infra .163 (9.886)

IT .223 (22.929)

Energy .326 (21.125)

Finance .169 (14.984)

Fmcg .110 (9.527)

Metal .042 (6.373)

.974

Infra .261 (21.489)

Energy .302 (27.011)

IT .130 (20.925)

Finance .161 (20.958)

Metal .075 (11.992)

Fmcg .035 (3.788)

.993

Finance .297 (34.674)

Infra .197 (15.860)

IT .152 (22.595)

Energy .207 (20.239)

Fmcg .105 (12.619)

Metal .091 (12.384)

.984

Step-7

Infra .170 (10.139)

IT .227 (23.039)

Energy .326 (21.165)

Finance .171 (15.175)

Fmcg .114 (9.768)

Metal .043 (6.554)

Media -.020 (-2.094)

.975

Infra .273 (22.606)

Energy .303 (27.872)

IT .127 (20.911)

Finance .162 (21.711)

Metal .082 (13.078)

Fmcg .044 (4.800)

Media -.032 (-4.761)

.993
Source: IBM SPSS statistics 19

*Multicollinearity has been checked through

collinearity diagnostics and none of the variable shows
significant value. Thus no collinearity is present in the
above data.

Table 7 shows that Infra sector is the best predictor in

determining the value of S&P CNX Nifty in both before
and during financial crisis period. Infra sector explained
93.5 % of total value of S&P CNX Nifty during the
financial crisis period. In the period of after financial
crisis, finance sector has played the major role and
explained 84.2 % value of S&P CNX Nifty. Thus the Infra
sector imposed the highest influence on S&P CNX Nifty
during the era of global financial meltdown and
Finance sector after the global financial meltdown
period.

The significance of beta is also found out by calculating

t-value. Table 7 shows that t-values are significant at 5
percent level of significance (shown in brackets) and
thus beta is significant in all sectors during all periods.

With the adding up of one by one sector in each step,

R-square is also increasing. This shows that these
sectors are significant in determining the value of S&P
CNX Nifty. In the before financial crisis period, seven
sectors are added to the regression equation which
explained 97.5 percent of variation. Except media, beta
of all other six sectors shown significant results as t-
value is positive for these sectors. The highest beta is
shown by Infra sector, followed by IT and energy
sector.

Similarly, in the during financial crisis period, 99.3

percent of variation in S&P CNX Nifty is explained by
seven sectors. The highest influence on S&P CNX Nifty
is put by energy sector, followed by Infra, finance and
IT sector.

In the after crisis period, six sectors are added to the

regression equation and they together explained the
98.4% of variation. Thus, it can be implied that during
the crisis period, sectors put highest effect on S&P CNX
nifty

In the end, it is concluded that due to globalization,

recession had also entered in the Indian economy. It’s
all sectors are affected by the crisis but the major
impact is seen on mainly two sectors IT and Infra. The
same impact on IT and Infra sector was found by Garg
and Pandey (2008), Khan (2009), Vidyakala,
Madhuvanthi and Poornima(2009), Kaur (2010), and
Rao and Naikwadi (2010), Thus, financial crisis had put
an adverse effect on Indian economy. The results might
help investors in making viable investment decision by
guiding them the most affected sectors due to crisis
and their improving trend towards the growth.

Notes for details

£- It denotes the Statement made by P.

Chidambaram on April 12, 2008 to the International
Monetary and Financial Committee, downloaded from
www.imf.org/external/spring/2008/imfc/statement/en
g/ind.pd-
 ¥- It indicates File “preview grid” downloaded from
http://search.worldbank.org/data?qterm=gdp
%20growth%20rate&language=EN- on 13 may 2012
¶- It denotes the statement made by Dr. Man Mohan
Singh Quoted from newspaper, “The Times of India:
Nov., 05,2008” downloaded from
http://articles.timesofindia.indiatimes.com/2008-11-
03/india-business/27920379_1_global-crisis-bank-
deposits-banking-system
Ɛ- It indicates the Source of recession date taken
from National bureau of economic research,
downloaded from
http://blogs.wsj.com/economics/2010/09/20/nber-
recession-ended-in-june-2009/
Ø- It denotes the statement made by Mr. Ajit
Kamath downloaded from
http://www.expresspharmaonline.com/20081231/mar
ket01.shtml

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List of Abbreviations

IMF- International Monetary Fund

JKSE- Jakarta Composite Index

KOSPI- The Korea Composite Stock Price Index

KLSE- Kaula Lampur Stock Exchange

OLS-Ordinary Least Square

[1] Trade and Development report (2009), Chapter-1,

“The Impact of the Global Crisis and the Short-term
Policy Response”, pg-1

[2] Trade and Development report (2008), Chapter-IV,

“Domestic sources of finance and investment in
productive capacity”, pg- 108

[3] Trade and Development report (2009), Page-III

[4] Trade and Development report (2009), Chapter-1,

“The Impact of the Global Crisis and the Short-term
Policy Response”, pg-1