Do Indian Sectoral Indices Follow a Random Walk? Empirical Evidence from Random Walk Tests

This study examines the weak-form market efficiency of major sectoral indices in the Indian stock market using daily return data. The analysis employs descriptive statistics, the Augmented Dickey–Fuller (ADF) unit root test, autocorrelation analysis, and the Variance Ratio (VR) test. Descriptive statistics reveal non-normality, volatility clustering, and fat-tailed distributions across all sectors. The ADF test confirms stationarity of sectoral return series at the level, indicating that returns do not follow a unit root process. Autocorrelation results largely suggest weak or insignificant linear dependence, whereas the Variance Ratio test strongly rejects the random walk hypothesis across all sectors and holding periods. Overall, the findings provide robust evidence against weak-form market efficiency in Indian sectoral indices and indicate the presence of mean-reverting behaviour and short-term predictability.