Evolving Global Linkage : A Time-Varying Analysis of the Indian Stock Market
Authors
-
Bishal Routh
Assistant Professor (Corresponding Author), Department of Commerce, Balarampur College, P.O.- Rangadih, Dist: Purulia - 723 143, West Bengal
https://orcid.org/0000-0003-0925-8115
-
Joy Sarkar
Assistant Professor, Department of Commerce, University of North Bengal, Raja Rammohunpur, Siliguri, Dist: Darjeeling - 734 013, West Bengal
https://orcid.org/0009-0007-2674-7398
-
Raju Paul
Senior Research Scholar, Department of Commerce, University of North Bengal, Raja Rammohunpur, Siliguri, Dist: Darjeeling - 734 013, West Bengal
https://orcid.org/0009-0006-0522-9703
DOI:
https://doi.org/10.17010/ijf/2026/v20i4/175481Keywords:
Indian stock market, global market, integration, segmentation, Kalman filter, time varying-integration, Bekaert & Harvey, ICAPM, business risk, liquidity risk.JEL Classification Codes : F15, F21, G11
Publishing Chronology: Paper Submission Date : September 5, 2025 ; Paper sent back for Revision : March 23, 2026 ; Paper Acceptance Date : March 29, 2026 ; Paper Published Online : April 15, 2026
Abstract
Purpose : To address the time-varying integration of the Indian stock market and to understand the true nature of domestic returns and their alignment with the global market. If misaligned, what could be the causes?
Methodology : The International Capital Asset Pricing Model framework proposed by Levine and Zervos was used to estimate the Market Integration Index. The index was further extended to a time-varying parameter using the Kalman Filter.
Findings : Domestic returns consistently outperformed global returns. It was found that 60% of the return was aligned to domestic factors; thus, only 40% was sensitive to global factors. The Kalman filter showed that the Indian stock market was deviating from the global market between 2012 and 2025, with two rare instances of co-movement.
Practical Implication : The positive and significant α0, together with β0 > 1, suggested the existence of a low-beta anomaly, implying that investors can earn higher returns at relatively lower risk, which enhances the attractiveness of the Indian stock market.
Originality : Numerous studies have investigated the integration of the Indian stock market with global markets; however, they have used fixed coefficient models, which did not capture the true dynamics of market integration, which is time-varying in nature. Hence, the Kalman filter, a state-space technique that allows parameters to vary across time, was used with the international capital asset pricing model to unveil the same. The study used the latest period from January 2012 to July 2025; hence, it would meet the needs of the current crop of investors.
Downloads
Published
How to Cite
Issue
Section
References
1) Almohamad, S. (2016). Financial integration in the MENA region (Doctoral dissertation, Western Sydney University). Western Sydney University. http://hdl.handle.net/1959.7/uws:36884
2) Arshanapalli, B., & Kulkarni, M. S. (2001). Interrelationship between Indian and US stock markets. Journal of Management and Research, 1(3), 141–148. https://indianjournals.com/article/jmr-1-3-002
3) Babu, M., Hariharan, C., & Srinivasan, S. (2016). Inter linkages of Asian Pacific stock markets: An empirical study. Amity Journal of Finance, 1(1), 48–56.
4) Batareddy, M., Gopalaswamy, A. K., & Huang, C.-H. (2012). The stability of long‐run relationships: A study on Asian emerging and developed stock markets (Japan and US). International Journal of Emerging Markets, 7(1), 31–48. https://doi.org/10.1108/17468801211197888
5) Bekaert, G., & Harvey, C. R. (1995). Time‐varying world market integration. The Journal of Finance, 50(2), 403–444. https://doi.org/10.1111/j.1540-6261.1995.tb04790.x
6) Bhaduri, S. N., & Samuel, A. A. (2009). International equity market integration: The Indian conundrum. Journal of Emerging Market Finance, 8(1), 45–66. https://doi.org/10.1177/097265270900800103
7) Bhunia, A. (2012). Financial market integration: Empirical evidence from India and select South Asian countries. Afro Asian Journal of Social Sciences, 3(3.1), 1–16. http://onlineresearchjournals.com/aajoss/art/78.pdf
8) Bose, S., & Mukherjee, P. (2006). A study of interlingages between the Indian stock market and some other emerging and developed markets. SSRN. https://doi.org/10.2139/ssrn.876397
9) Chittedi, K. R. (2011). Integration of international stock markets: With special reference to India. SSRN. https://ssrn.com/abstract=1568587
10) Dhal, S. (2009). Global crisis and the integration of India's stock market. Journal of Economic Integration, 24(4), 778–805. http://www.jstor.org/stable/23001249
11) Gangadharan, S. R., & Kumar, D. (2017). Integration of the Indian stock market with the world market: A study based on the time-varying Kalman filter approach. International Journal of Accounting and Finance, 7(2), 110–126. https://doi.org/10.1504/IJAF.2017.085490
12) Joseph, B., & Rajeshwari, U. R. (2023). Impact of gold price and oil price on the Indian stock market : With special reference to the Bombay Stock Exchange market. Indian Journal of Research in Capital Markets, 10(3–4), 74–83. https://doi.org/10.17010/ijrcm/2023/v10i3-4/173432
13) Kasilingam, L., Selvam, M., Vinayagamoorthi, V., Mahalingam, G., & Ebenezer, B. (2014). Inter-linkages, comovements and causal relationship among emerging stock markets in Asia with reference to Stock Exchange of Thailand. In Proceedings of the International Congress (pp. 1–9). https://www.researchgate.net/profile/Lingaraja-Kasilingam/publication/271079434
14) Kasilingam, L., Selvam, M., & Vinayagamoorthi, V. (2015). Long run dynamic linkages between emerging stock markets in Asia and a developed stock market (DJIA). Research Journal of Applied Sciences, 10(5), 203–211. https://www.researchgate.net/publication/280649198
15) Kumar, N., & Goel, D. (2024). Macroeconomic determinants of price dynamics in the Indian stock market. Indian Journal of Finance, 18(9), 25–41. https://doi.org/10.17010/ijf/2024/v18i9/174457
16) Kumar, A., Khanna, S., Dhingra, S., & Sinha, N. (2022). Financial contagion in European equity markets: Evidence from the US subprime and the Eurozone crises. Indian Journal of Finance, 16(8), 8–28. https://doi.org/10.17010/ijf/2022/v16i8/171372
17) Lau, S. T., & McInish, T. H. (1993). Comovements of international equity returns: A comparison of the pre- and post-October 19, 1987, periods. Global Finance Journal, 4(1), 1–19. https://doi.org/10.1016/1044-0283(93)90010-v
18) Lee, S. B., & Kim, K. J. (1993). Does the October 1987 crash strengthen the co‐movements among national stock markets? Review of Financial Economics, 3(1), 89–102. https://doi.org/10.1002/j.1873-5924.1993.tb00574.x
19) Levine, R., & Zervos, S. (1998). Stock markets, banks, and economic growth. American Economic Review, 88(3), 537–558. https://econpapers.repec.org/article/aeaaecrev/v_3a88_3ay_3a1998_3ai_3a3_3ap_3a537-58.htm
20) Maheta, D. (2016). Integration among BRICS countries stock markets: Evidence from co-integration analysis. Sankalpa, 6(1), 1–16.
21) Menon, N. R., Subha, M. V., & Sagaran, S. (2009). Cointegration of Indian stock markets with other leading stock markets. Studies in Economics and Finance, 26(2), 87–94. https://doi.org/10.1108/10867370910963028
22) Mishra, P. K., & Mishra, S. K. (2022). Is the impact of COVID-19 Significant in determining equity market integration? Insights from BRICS economies. Global Journal of Emerging Market Economies, 14(2), 137–162. https://doi.org/10.1177/09749101211070960
23) Modi, A. G., Patel, B., & Patel, N. (2010). The study on co-movement of selected stock markets. International Research Journal of Finance and Economics, 47, 164–179. https://www.researchgate.net/publication/279232629
24) Mohan, A., Mathew, T., & Daniel, R. S. (2025). Determinants of the stock return – Exchange rate dynamic linkage in India and China. Indian Journal of Finance, 19(1), 67–80. https://doi.org/10.17010/ijf/2025/v19i1/174696
25) Mohapatra, A. K., Mohanty, D., Sardana, V., & Shrivastava, A. (2024). The ripple effect : Influence of exchange rate volatility on Indian sectoral indices. Indian Journal of Finance, 18(2), 8–24. https://doi.org/10.17010/ijf/2024/v18i2/173519
26) Mukherjee, K. N., & Mishra, R. K. (2010). Stock market integration and volatility spillover: India and its major Asian counterparts. Research in International Business and Finance, 24(2), 235–251. https://doi.org/10.1016/j.ribaf.2009.12.004
27) Mukherjee, P., & Bose, S. (2008). Does the stock market in India move with Asia?: A multivariate cointegration-vector autoregression approach. Emerging Markets Finance and Trade, 44(5), 5–22. https://doi.org/10.2753/ree1540-496x440501
28) Nagina, R. (2022). The nexus of stock markets among BRICS nations : An empirical analysis pre and post spread of the COVID-19 pandemic. Indian Journal of Finance, 16(10), 24–42. https://doi.org/10.17010/ijf/2022/v16i10/172386
29) Palamalai, S., Kalaivani, M., & Devakumar, C. (2013). Stock market linkages in emerging Asia-Pacific markets. SAGE Open, 3(4). https://doi.org/10.1177/2158244013514060
30) Pandey, V. (2023). Financial contagion between crude oil, gold, and equity sectors in India during COVID. Indian Journal of Finance, 17(3), 20–36. https://doi.org/10.17010/ijf/2023/v17i3/172670
31) Pandya, F. H. (2016). Are stock markets interdependent? An empirical study of selected market indices. International Journal of Financial Management, 6(3). https://doi.org/10.21863/ijfm/2016.6.3.037
32) Patel, D., & Patel, R. (2012). The study on co-movement & interdependency of Indian stock market with selected foreign stock markets. Journal of Arts, Science & Commerce, 3(2), 9–13. https://www.researchgate.net/publication/256022700
33) Patel, R. J., Gandhi, D. J., Patel, M. K., & Modi, T. M. (2023). Integration of bond markets and portfolio diversification : Evidence from the 2008 global financial crisis. Indian Journal of Finance, 17(4), 27–44. https://doi.org/10.17010/ijf/2023/v17i4/172697
34) Patel, S. A. (2013a). Dynamic linkages of developed equity markets with Indian stock market. Vilakshan: The XIMB Journal of Management, 10(1), 21–36. https://www.researchgate.net/publication/333747879
35) Patel, S. A. (2013b). Dynamic interdependence among Asian equity markets: Empirical evidence from India. Journal of Management and Research, 13(4), 219–228. https://indianjournals.com/article/jmr-13-4-004
36) Pukthuanthong, K., & Roll, R. (2009). Global market integration: An alternative measure and its application. Journal of Financial Economics, 94(2), 214–232. https://doi.org/10.1016/j.jfineco.2008.12.004
37) Raj, J., & Dhal, S. (2008). Integration of India's stock market with global and major regional markets. Bank for International Settlements. https://www.bis.org/publ/bppdf/bispap42h.pdf
38) Rajkumar, G. S. (2015). Linkages between India and three ASEAN stock markets: A co-integration approach. Journal of Commerce and Accounting Research, 4(1), 27 – 34.
39) Raju, G. A., & Khanapuri, H. R. (2009). Regional integration of emerging stock markets in Asia: Implications for international investors. The Journal of Investing, 18(3), 31–39. https://doi.org/10.3905/joi.2009.18.3.031
40) Rajwani, S., & Mukherjee, J. (2013). Is the Indian stock market cointegrated with other Asian markets? Management Research Review, 36(9), 899–918. https://doi.org/10.1108/mrr-06-2012-0141
41) Rastogi, S. (2013). Long-term association of stock markets of different nations: An empirical study. Vision: The Journal of Business Perspective, 17(4), 303–313. https://doi.org/10.1177/0972262913505372
42) Routh, B. (2023). Risk premia of firms of a globally integrated market: An empirical study from India. Business Studies, 44(2), 32–48. https://www.caluniv.ac.in/dj/BS-Journal/v-44-II/BR.pdf
43) Routh, B., & Sarkar, J. (2024). Assessing the presence of bubbles in the Indian stock market: An empirical analysis. In Finance and human resource management issues and imperative (pp. 79–94). Mittal Publications.
44) Routh, B., & Sarkar, J. (2025). Divergence of Indian stock market from global market post-COVID. The PRISM : A Peer-Reviewed Journal, 14, 239–248.
45) Sahoo, S., & Kumar, S. (2023). Volatility spillover among the sectoral indices of the Indian capital market: Evidence from the COVID period. Indian Journal of Finance, 17(9), 41–57. https://doi.org/10.17010/ijf/2023/v17i9/173183
46) Sarkar, J., & Paul, R. (2024). The level of integration of select international markets in COVID crisis: An empirical assessment. Indian Journal of Research in Capital Markets, 11(3), 32–44. https://doi.org/10.17010/ijrcm/2024/v11i3/174622
47) Shah, A., Deo, M., & King, W. (2015). Characterizing co-movements between Indian and emerging Asian equity markets through wavelet multi-scale analysis. East Asian Economic Review, 19(2), 189–219. https://doi.org/10.11644/kiep.jeai.2015.19.2.296
48) Shahani, R., Talwar, A., & Gupta, S. (2017). Dynamics of the co-movement of the returns of the sectorial stock indices of India, US and European economies. SSRN. https://ssrn.com/abstract=3218099
49) Sharma, P. (2012). Asian emerging economies and United States of America: Do they offer a diversification benefit? Australian Journal of Business and Management Research, 1(4), 85–92. https://doi.org/10.52283/nswrca.ajbmr.20110104a09
50) Siddiqui, S. (2008). Exploring integration between selected European stock market indexes and sensex. Pranjana: The Journal of Management Awareness, 11(2), 79–95. https://indianjournals.com/article/pr-11-2-007
51) Siddiqui, S. (2009). Stock markets integration: Examining dynamic linkages between select Asian and US markets. SSRN. https://ssrn.com/abstract=2699400
52) Singh, S. K., & Rashmi, R. (2018). Is stock market of Bharat interlinked with other selected nations: Evidence from Asia and Europe? International Journal of Research Culture Society, 2(1), 59–67.
53) Srikanth, P. (2012). Integration of Indian stock market with other markets in the Asia-Pacific region. SSRN. https://ssrn.com/abstract=2156125
54) Subramanian, U. (2009). Cointegration of stock markets in East Asia in the boom and early crisis period (SSRN Working Paper). Social Science Research Network. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1234567
55) Syed, A. A., Tripathi, R., & Deewan, J. (2021). Investigating the impact of the first and second waves of the COVID - 19 pandemic on the Indian stock and commodity markets : An ARDL analysis of gold, oil, and stock market prices. Indian Journal of Finance, 15(12), 8–21. https://doi.org/10.17010/ijf/2021/v15i12/167306
56) Thangamuthu, M., & Parthasarathy, K. (2015). Cointegration and stock market interdependence: Evidence from South Africa, India and the USA. South African Journal of Economic and Management Sciences, 18(4), 475–485. https://doi.org/10.4102/sajems.v18i4.1029
57) Thomas, N., Kashiramka, S., & Yadav, S. S. (2016). Dynamic linkages among developed, emerging and frontier equity markets of Europe. SSRN. https://ssrn.com/abstract=2960838
58) Tiwari, A. K., Dar, A. B., Bhanja, N., & Shah, A. (2013). Stock market integration in Asian countries: Evidence from Wavelet multiple correlations. Journal of Economic Integration, 28(3), 441–456. https://doi.org/10.11130/jei.2013.28.3.441
59) Veerappa, B. S. (2016). Cointegration of Asian stock markets: Empirical evidence from India. International Journal of Financial Management, 6(2). https://doi.org/10.21863/ijfm/2016.6.2.030
60) Velip, S., & Guntur, A. R. (2019). Stock market integration: A review of literature from a global perspective. SSRN. https://ssrn.com/abstract=3661313
61) Vodwal, S., & Sawaliya, P. (2025). Identifying equity market integration : A study of NIFTY-50 and the world's top six indices. Indian Journal of Research in Capital Markets, 12(4), 26–38. https://doi.org/10.17010/ijrcm/2025/v12i4/175950
62) Yeoh, B. K., Hooy, C.-W., & Arsad, Z. (2010). Time-varying world integration of the Malaysian stock market: A Kalman filter approach. Asian Academy of Management Journal of Accounting and Finance, 6(2), 1–17. http://web.usm.my/journal/aamjaf/vol%206-2-2010/6-2-1.pdf
