The Dynamic linkage amoung Sectoral Indices :Evidence from Indian Stock Market

Abstract

The sectoral indices will act as a benchmarking indicator for observing the performance stocks from a particular sector. An in depth examination on causal impact of a sector on the other sectors and the market index can assist the investors and portfolio managers to a great extent in addressing some key issues relating to portfolio revision. In this study we explore the co-movements of twelve NSE sectoral indices and Nifty on a daily basis from January 2012 to December 2016. The Granger causality test produced the evidence of strong bidirectional linkage between private banking sector and nifty. With respect to IT and FMCG sectors a significant unidirectional causal affiliation was reported with Nifty. The cross sectoral examination results confirmed that irrespective of shareholding pattern a strong bidirectional relation can be observed with banking stocks.