Comparative Analysis of Indian Stock Market with ... - Great Lakes

for NSE. Russian stock exchange also rose but marginally. But the volatility is higher which
shows that the trading activity has started to pick up. During period 4, both the exchanges rose
sharply and moved in an almost identical fashion. Correlation is also very high during this
period. This shows a lot more integration of two markets with each other.
NSE vs. Hang Seng
Fig 1.2
In Fig1.2, period 1 shows that there is almost no correlation between these two exchanges.
Hang Seng was rising very sharply because of the East Asian miracle. Whereas India, not part of
this success story, remained almost untouched by this boom. NSE is almost constant during this
period. During period 2, Hang Seng crashed 50 percent and then rose back 100 percent. Thus, it
showed very high volatility during this period. NSE also rose during this period because of
pervasive tech boom but the rise was not as spectacular as Hang Seng. Hang Seng might also
have risen sharply because of its previous low levels. Period 3, Hang Seng was falling steadily;
showing a downward trend. This might be due to the fear of global recession. But the NSE was
not much affected. During Period 4, NSE was rising in almost identical manner with the Hang
Seng. 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, NSE is
showing higher correlation during this period.
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©Great Lakes Herald – April 2007 Volume 1, Issue 1 by Great Lakes Institute of Management, Chennai