A Study on Cointegration and Causality Relationship of Indian Stock Market with Select World Markets

This study explores the cointegration and causality relationships of the Indian stock market with selected major markets of the world such as the market of USA, Japan, Germany, UK, France, Canada, Italy, Australia, South Korea and Spain. Applying the Johansen cointegration test and Granger causality analysis, the study find that significant long-run equilibrium relationships and short-run influences exist between these several variables. Findings show that the BSE Sensex is more integrated globally than the NSE Nifty 50, suggesting India’s increasing prominence in international financial market. The findings offer essential insights to investors pursuing portfolio diversification, policymakers working to improve financial stability, and firms devising global investment strategies. The findings also underscore the influence of economic events and global market interdependencies, which necessitate adaptive and responsive policies in a rapidly changing global financial environment.