BUSINESS

RESEARCH

TITLE AND ABSTRACT

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 A Comparative Interrelationship Study Of Indian Stock Market With
Global Stock Markets

Kumari Akanksha Singh

Department Of Institute Of Management Science, Lucknow
University
MBA (5Years) 10th Semester – Finance
17216007895

Abstract
The stock market is witnessing heightened activities and is increasingly gaining
importance. In the current context of globalization and the subsequent
integration of the global markets this paper captures the trends, similarities and
patterns in the activities and movements of the Indian Stock Market in
comparison to its international counterparts. This study covers New York Stock
Exchange (NYSE), Hong Kong Stock Exchange (HSE), Tokyo Stock Exchange
(TSE), Russian Stock Exchange (RSE), Korean Stock Exchange (KSE) from
various socio-political-economic backgrounds. Both the Bombay Stock Exchange
(BSE) and the National Stock Exchange of Indian Limited (NSE) have been used
in the study as a part of Indian Stock Market. The time period has been divided
into various eras to test the correlation between the various exchanges to prove
that the Indian markets have become more integrated with its global counterparts
and its reaction are in tandem with hat are seen globally.

ACKNOWLEDGEMENT
It is with great pleasure and learning spirit that I am bringing out this Business
Research. I use this opportunity to express our heartiest gratitude to the support
and guidance offered to us from various sources during the courses and completion
of the visit program.

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First and foremost, to almighty god for giving endless blessings throughout the
process of the research study, by providing and granting the opportunity the
capability to accomplish this study successfully.

I would like to extend my sincere gratitude to Dr. Pooja Sharma, coordinator of

the Department of MBA (5Years), for providing me the opportunity to undertake
this Business Research and for giving me time encouragement and guidance
throughout my report.

I am grateful to our OSD Sir Prof. Manoj Kumar Agarwal for their timely
guidance and in providing the required facilities and information for completion
the report.

Dr. Nimisha, adviser and faculty, for her support, advices, guidance, valuable
comments, suggestions, and provisions that benefited me much in completion and
success of this study,; who gave her love care shelter in doing this research. Sharing
her knowledge and helped in the analysis o0f data and its statistical computation.
And last by giving an endless helped to finish this research. I am very thankful for
having such a good advisor and faculty like you.

I am thankful to and fortunate enough to get constant encouragement, support and

guidance from my mentor, my family and my friends

KUMARI AKANKSHA SINGH

17216007895
MBA (5 YEARS)
FINANCE

Introduction
The Indian stock exchanges hold a place of prominence not only in Asia but also
at the global stage. The Bombay Stock Exchange (BSE) is one of the oldest
exchanges across the world, while the National Stock Exchange (NSE) is among
the best in terms of sophistication and advancement of technology. The Indian
stock market scene really picked up after the opening up of the economy in the
early nineties. The whole of nineties were used to experiment and fine tune an

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efficient and effective system. The slowdown in the US economy and interest rate
tightening made the equation more complex. However after 2000 riding on a
robust growth and a maturing economy and relaxed regulations, outside
investors- institutional and others got more scope to operate. This opening up of
the system led to increased integration with heightened cross-border flow of
capital, with India emerging as an investment ‘hot spot’ resulting in our stock
exchanges being impacted by global cues like never before. (Gupta, 2011) The
study pertains to comparative analysis of the Indian Stock Market with respect to
various international counterparts. Exchanges are now crossing national
boundaries to extend their service areas and this has led to cross-border
integration. Also, exchanges have begun to offer cross-border trading to facilitate
overseas investment options for investors. This not only increased the appeal of
the exchange for investors but also attracts more volume. Exchanges regularly
solicit companies outside their home territory and encourage them to list on their
exchange and global competition has put pressure on corporations to seek capital
outside their home country. The Indian stock market is the world third largest
stock market on the basis of investor base and has a collective pool of about 20
million investors. There are over 9,000 companies listed on the stock exchanges
of the country. The Bombay Stock Exchange, established in 1875, is the oldest in
Asia. National Stock Exchange, a more recent establishment which came into
existence in 1992, is the largest and most advanced stock market in India is also
the third biggest stock exchange in Asia in terms of transactions. It is among the 5
biggest stock exchanges in the world in terms of transactions volume. (Joshi)
The following table gives the country and the exchange with the name of its
indices:

COUNTRY STOCK EXCHANGE INDICES NAME

National Stock
India S & P Nifty
Exchanges

Bombay Stock
India Sensex
Exchanges

Hong Kong Stock

Hong Kong Hang Seng
Exchange

New York Stock

USA NYSE
Exchange

Korea Korean Stock Exchange KRX 100

Russia Russian Stock Exchange RTX Index

Tokyo Tokyo Stock Exchange NIKKEI 225

Presently, the fluctuations in the Indian market are attributed heavily to cross
border capital flows in the form of FDI, FII and to reaction of Indian market to
global market cues. In this context, understanding the relationship and influence

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of various exchanges on each other is very important. This study compares global
exchanges which are from different geo politico- socio-economic areas. With the
cross border movements of capital like never before in the form of FDI and FII,
coupled with the easing of restrictions bringing various stock exchanges at par in
terms of system and regulations, it can be assumed reasonably that a particular
stock exchange will have some impact on other exchanges. (Ghosh, 2004)

Problem
Presently, the fluctuations in the Indian market are attributed heavily to cross
border capital flows in the form of FDI, FII and to reaction of Indian market to
global market cues. In this context, understanding the relationship and influence
of various exchanges on each other is very important. This study that compares
global exchanges which are from different geo-politico-socio-economic areas.
With the cross border movements of capital like never before in the form of FDI
and FII, coupled with the easing of restrictions bringing various stock exchanges
at par in terms of system and regulations, it can be assumed reasonably that a
particular stock exchange will have some impact on other exchanges.

Aims & Objectives

The main objective of this study is to capture the trends, similarities and patterns
in the activities and movements of the Indian Stock Market in comparison to its
international counterparts. The aim is to help the investors (current and
potential) understand the impact of important happenings on the Indian Stock
Exchange. This is especially relevant in the current scenario when the financial
markets across the globe are getting integrated into one big market and the
impact of one exchange on the other exchanges . In other others, the intention is
to test the hypothesis, ‘whether various stock exchanges globally have any impact
on each other’ or they are correlated in any way with regard to their movements
and, if so, to what extent. Arising out of the main hypothesis is the question-
given the above context: What impact would the result have on the understanding
that international diversification of investment is desirable and profitable with
regard to both risk and return?

Review Of Literature
Schollhammer and Sand (1985) studied the inter-dependence of stock
markets across the world. For this, he focused on the markets of major European
Countries – contrasted against those in the United States, in an empirical
investigation. This was among the first comprehensive works to study the
potential relation between stock exchanges in different countries. The study
found an interdependence in the stock markets of Germany, UK, Netherlands and
Switzerland with each other, but not France. Further, the former countries also
showed a positive indication towards a relation with the markets of the US.

Pakac-McMiken (1997) used the unit root test and the co-integration test to
examine five ASEAN markets. His findings from the unit root test suggest that the

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markets are weak form efficient. Further, from the cointegration tests, he found
that besides Indonesia, all the other market movements were related and linked
with449 Smriti Menon International Journal of Engineering Technology Science
and Research IJETSR www.ijetsr.com ISSN 2394 – 3386 Volume 5, Issue 3
March 2018 each other, ie, Malaysia, Singapore, Thailand and the Philippines.
However, though he did make some findings, there is yet to be found any
establishment of statistical nature in the regard
Biswas, Joydeep (2006) in his paper comparing the Indian stock market
before and after the liberalization decade states that though the trading in the
post liberalization era of the country became more focused on the trading of
specific sectors and the volatility has remained more or less unchanged. Thus, the
investors, according to him, are at a higher risk of greater instability. The findings
also indicate that unless the Indian economy becomes more driven by news
rather than noise, the progress of the stock market remains at stake.
Dhal, Sarat (2009), in his study on the global crisis and the integration of
India’s stock market, ran multivariate co-integration analysis of the indices of
stock markets in US, UK, Japan and a few regional markets including Hong Kong,
etc. The study was able to draw an interesting insight that Indian stock index
prices were integrated with the regional as well as global markets when they were
taken into account only in US Dollar values. If local currencies were used, then
the tests for integration did not show as much of a significance. This suggests a
strong tendency of influence of foreign investors in India. Moreover, this lack of
integration among the markets under consideration, bearing in mind the
evidence found regarding the diminished role of domestic investors in the
country
Paramati and Gupta (2011) researched upon the relation between the
performance of a country’s stock markets and their corresponding relationship
with the economic growth prevailing in the country. The study, which was
conducted on data in the duration between April 1996 and March 2009, seeked to
establish a relationship between the variables under consideration – in the long
run and in the short run. Using a series of different empirical tests, the study was
able to find that in the short run, there was a causal relationship between
economic growth and stock prices in the country. In the long run too, they found
a relationship between the variables, on a quarterly as well as a monthly scale.
Dr. Ch Chaitayana (2015) in his study aims to find out the stock exchange of
BSE, NSE, Hang Sang & Tokyo which is performing financially better on various
basis. The select global market indices are integrated with other Asian Exchanges.

Sources of Data
Primary And Secondary Data both kind will be used for the collection of
sampling. Primary Data are collected Directly from their official website &
Secondary Data collected from the website of the Exchanges, online news,
through business newspaper, and some research paper.

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Research Methodology
For the comparative analysis of different Stock Exchanges, the period chosen is
from 1st January 2008 to 31st May 2021. This period is divided into different sets
of years, like 2008-12, 2012-16, 2016-20 and 2020-21. The world is divided into
four main regions, namely, the US, Euro Region, India and Asian Region. Stock
Exchanges representing various regions used in this study include NSE (India),
BSE (India), NYSE (USA), TOKYO Stock Exchange (Japan) and HONG KONG
Stock Exchange (China). The number of sample units for this study is five.
This is the main part of the study wherein the various stock exchanges of the
sample have been compared on certain parameters, both qualitatively and
quantitatively.

A. Qualitative Analysis
In this section the various stock exchanges have been compared on the following
parameters;
1. Market Capitalization
2. Number Of Listed Securities
3. Listing Agreements
4. Circuit Filters
5. Settlement
These parameters are used to look at selected important aspects of any stock
exchange, viz., the market capitalization gives an idea about the size of the
respective exchanges; whereas the number of listed securities acts as a indicator
for the volume and liquidity of any exchange. The listing agreements take care of
the governance issue, while circuit filters give an insight into the risk
management framework of he said exchange. Finally, the efficiency of a stock
exchange has been measured in terms of its settlement process.

Market Capitalization
Market capitalization is the measure of corporate size of a country. It shows the
current stock price multiplied by the number of outstanding shares. It is
commonly referred to as Market cap. It is calculated by multiplying the number of
common shares with the current price of those shares. This term is often confused
with capitalization, which is the total amount of funds used to finance a firm's
balance sheet and is calculated as market capitalization plus debt (book or market
value) plus preferred stock. While there are no strong definitions for market cap
categorizations, a few terms are frequently used to group companies based on its
capitalization. The table below shows the market capitalization of various stock
markets in the world.
Table 1. World Stock Markets and their market capitalization
Worldwide Stock Markets
Source: Statista

S.N Country Market Cap (US$ % of World

o trillion)

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 1. USA 33.89 33.53
2. China 12.22 12.09
3. Japan 6.72 6.65
4. HONG KONG 6.13 6.07
5. France 5.44 5.38
6. Belgium 4.70 4.65
7. UK 3.57 3.53
8. Canada 2.64 2.61
9. India 2.60 2.57
10. Saudi Arabia 2.43 2.40
11. Germany 2.28 2.26
12. Korea 2.18 2.16
13. Switzerland 2.00 1.98
14. Australia 1.72 1.70
15. Iran 1.21 1.20
16. Netherlands 1.10 1.09
17. South Africa 1.05 1.04
18. Brazil 0.99 0.98
19. Spain 0.76 0.75
20. Others 7.44 7.36
Total 101.07 100

Based on the above study, it can be observed that India is 9th in the world
ranking of market capitalization. This is in spite of having the third largest
investor base, after Japan and USA, and having the largest number of companies
listed. United States leads the list of countries with the highest market
capitalization. It is interesting to note that the total market capitalization of all
the companies listed on the New York Stock Exchange is greater than the amount
of money in the United States. As mentioned earlier, the above data pertain to the
year 2020. As on November 2020, the total global market capitalization for all
stock markets was $95 trillion.

Number Of Listed Securities

Listing in a stock exchange refers to the admission of the securities of the
company for trade dealings in a recognized stock exchange. The securities may be
of any public limited company, Central or State Government, quasi-governmental
and other financial institutions/corporations, municipalities, etc. Securities of
any company are listed in a stock exchange to provide liquidity to the securities,
to mobilize savings and to protect the interests of the investors.

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 Number Of Listed Securities
India 5215
USA 4266
China 4154
Canada 3922
Japan 3754
Spain 2711
Hong Kong 2353
Korea Republic 2318
Australia 1902
United Kingdom 1858
Malaysia 927
Poland 782
Vietnam 745
Thailand 743
Indonesia 713
0 1000 2000 3000 4000 5000 6000

Number Of Listed Securities

India has the highest number of companies listed in the stock market. Out of this,
about 69.32% of the companies are listed with the Bombay Stock Exchange. After
India, United States has the highest number of companies listed.
Indices
Parameter BSE NSE NYSE TOKYO HONG
s Stock KONG
Exchang Stock
e Exchange

Name SENSEX NIFTY Dow Nihon Hang Seng

Jones Keizai
Industri Shimbun
al (NIKKEI-
Average 225)
No Of 30 50 30 225 58
Companies
Method Of Free-Float Capitalizatio Price- Price- Market-
Calculation Market n-Weighted weighted weighted capitalizatio
Capitalizatio Index Index n-weighted
n Stock-
market
Index

Listing Agreements

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Bombay Stock Exchange
Eligibility Criteria for IPOs/FPOs (Follow-on Public Offerings):
Companies have been classified as large cap companies and small cap companies.
The minimum post-issue paid-up capital of the applicant company shall be ₹10
crore for IPOs & ₹3 crore for FPOs; and the minimum issue size shall be ₹10
crore; and the minimum market capitalization of the Company shall be ₹25 crore.
Parameters Small Cap Large Cap
Companies Companies
Min post issue paid up ₹3 crores ₹3 crores
Capital
Min Issue size ₹3 crores ₹10 crores
Min Market ₹5 crores ₹25 crores
Capitalization
Min Public Shareholders 1000
Min Turnover ₹3 crores preceding
three 12 months period

National Stock Exchange

Eligibility Criteria for new Companies (IPOs)

Paid Up Capital : Not less than ₹10 crores;

Market Capitalizations: Not less than ₹25 crores

At least three years track record:

 The applicant company has not been referred to erstwhile Board for
Industrial and Financial Reconstruction (BIFR) or No proceedings have been
admitted under Insolvency and Bankruptcy Code against the issuer and
Promoting Companies.
 The company has not received any winding up petition admitted by a NCLT/
Court.
 No material regulatory or disciplinary action by a stock exchange or regulatory
authority in the past three years against the applicant company.
 The company/ entity should have operating profit from operations for at least
any 2 out of 3 financial years preceding the application and its net worth
should be positive.
 The promoters/promoting company, incorporated in or outside India.
 Promoters mean one or more persons with mi9nimum 3 years of experience
in the same line of business and shall be holding at least 20% of the post issue
equity share capital individually or severally.
 Proprietary/Partnership firm and subsequently converted into a Company
(not in existence as a company for three years) and approaches the Exchange
or listing.
Existing Companies listed on other stock exchanges

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 Paid up Capital: Not less than ₹10 Crores
Market Capitalization: Not less than ₹25 crores.
Minimum Listing Requirements for companies listed on other stock exchanges:
The company should have minimum issued and paid up equity capital of ₹3
crores.
The Company should have profit making track record for last three years:
Minimum net worth of ₹20 crores Minimum market capitalization of the listed
capital should be at least two times of the paid up capital.
New York Stock Exchange
Domestic listing on NYSE requires minimum certain minimum standards to be
met.
Distribution and Size criteria
Distribution of shares can be attained through U.S. public offerings, acquisitions
made in the U.S., or by other similar means.
IPOs,
Distributio
Spin-
n Standards All other
offs, Transfer or Quotation
1, 2 Rule listings
Carve-
102.01 A-B
outs
Shareholders 400 round 400 400 round
2,200 total 500 total
3 lot Round lot lot
Publicly Held
1.1 mm 1.1 mm 1.1 mm 1.1 mm 1.1 mm
Shares⁴
Market Value
of Publicly $40 mm $100 mm $100 mm $100 mm $100 mm
Held Shares⁴
Minimum
$4.00 $4.00 $4.00 $4.00 $4.00
Share Price
Average
Monthly
Trading 100,000 100,000 1 mm
Volume
(Shares)

Financial Criteria
Financial I. Earnin II. Global Real Closed- Business
Standards gs Test Market Estate end Develop
Rule Capital Investmen Manage ment

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 ment
Investme
ts Trusts Compani
102.01 nt
ization 10 Rule es Rule
C(I) Compani
102.05 102.04B
es Rule
102.04A
Aggregate for
last three fiscal
years >= $10
mm ⁶’⁷; Each
of the two
Adjusted Pre- most recent
tax Income fiscal years
>=$2 mm;
Each of the
prior three
fiscal years
>$0⁸
Global
Market $200 mm⁹ $75 mm
Capitalization
Shareholders’
$60 mm
Equity⁵
Market Value
See Chart See Chart See Chart
of Publi9cly $60 mm $60 mm
Above Above Above
Held Shares⁴

1. When Considering a listing application from a company organized under the

laws of Canada, Mexico or the United States (”North America”), the Exchange
will include all North American holders and North American trading Volume
in applying the minimum shareholder and trading volume requirements.
2. When listing a company from outside North America, the Exchange may, in its
discretion, include holders and trading volume in the company’s home
country or primary trading market outside the United States in applying the
applicable listing standards, provided that such market is a regulated stock
exchange.
3. The number of shareholders includes shareholders of record and beneficial
holders of shares held in street name.
4. Shares held by directors, officers, or their immediate family members and
other concentrated holdings of 10% or more are excluded in calculating the
number of publicly held shares and market value of publicly held shares.
5. Pro forma for the offering.
6. Under certain circumstances, companies may qualify with $10mm in
aggregate for two years and nine months.
7. Two years if a company is an Emerging Growth Company under the JOBS Act
and has only filed two years of financial statements.
8. If loss in third year, adjusted pre-tax of $12mm in aggregate is required, with
at least $5mm in the most fiscal year, and $2mm in the next most recent fiscal
year.
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 9. Existing public companies must meet the minimum global market
capitalization for a minimum of 90 consecutive trading days prior to receipt of
clearance to make application to list on the Exchange.
10. For Real Estate Investment Trusts (REITs) that do not have a three-
year operating history. REITs with more than three years of operating history
must qualify under the earnings or global market capitalization test.
Tokyo Stock Exchange
Criteria for Listing

Main Markets (2nd Main Markets (1st

Criteria
Scetion) Section)

1) Number of
shareholders
400 or more 800 or more
(As of the
listing day)
a. The number of
a. The number of tradable shares:
tradable shares: 20,000 units or
2,000 units or more more
b. The market b. The market
2) Tradable shares capitalization of the capitalization of the
*1 (As of the tradable shares: tradable shares:
listing day) 1billion ¥ or more 10billion ¥ or more
c. The number of c. The number of
tradable shares: 25% tradable shares: 35%
or more of the listed or more of the listed
stocks, etc.
stocks, etc.
3) Market
Capitalization
- 25 billion yen or more
(As of the
listing day)
The business activities have The business activities have
4) Number of been continuously carried been continuously carried
consecutive out by setting up a board of out by setting up a board of
years of directors since a day before directors since a day before
conducting the day which is three (3) the day which is three (3)
business years prior to the initial years prior to the initial
listing application day listing application day
5) Amount of net 5 billion yen or more (net
assets (As of the Positive assets on a separate basis
listing day) should not be negative)
6) Amount of Ordinary income in the The following a. or b. must
profits and most recent year is at least be satisfied
sales JPY 100 million a. The total amount of
profits in the last
two (2) years are at

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 least 2.5 billion yen
b. The sales for the last
year are at least 10
billion yen and the
market
capitalization as of
the listing day is
expected to reach at
least 100 billion yen
7) False statement The following a. through d. The following a. through d.
or adverse must be satisfied must be satisfied
opinion, etc. a. No false statement is a. No false statement is
made in the made in the
securities reports, securities reports,
etc. which contain or etc. which contain or
make reference to make reference to
financial statements, financial statements,
etc. for each business etc. for each
year or each business year or
consolidated each consolidated
accounting year accounting year
which ended in the which ended in the
last two (2) years or last two (2) years or
quarterly financial quarterly financial
statements, etc. for a statements, etc. for a
quarterly accounting quarterly accounting
period in each period in each
consolidated consolidated
accounting year; accounting year;
b. The audit report b. The audit report
attached to financial attached to financial
statements, etc. for statements, etc. for
each business year or each business year
each consolidated or each consolidated
accounting year accounting year
which ended in the which ended in the
last two (2) years last two (2) years
contains an contains an
“unqualified “unqualified
opinion” or a opinion” or a
“qualified opinion “qualified opinion
with exceptions” of with exceptions” of
certified public certified public
accountants, etc, accountants, etc,
provided; provided;
c. The audit report c. The audit report
attached to financial attached to financial
statements, etc for statements, etc for
the business year the business year
and consolidated and consolidated
accounting year accounting year
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 which ended in the which ended in the
last year and a last year and a
quarterly review quarterly review
report attached to report attached to
quarterly financial quarterly financial
statements, etc. for a statements, etc. for a
quarterly accounting quarterly accounting
period in the period in the
business year which business year which
ended in the last ended in the last
year contain an year contain an
“unqualified “unqualified
opinion” or an opinion” or an
“unqualified “unqualified
conclusion” of conclusion” of
certified public certified public
accountants, etc.; accountants, etc.;
provided; provided;
d. Where a stock, etc. d. Where a stock, etc.
pertaining to an pertaining to an
initial listing initial listing
applicant is listed on applicant is listed on
any other financial any other financial
instruments instruments
exchange in Japan, exchange in Japan,
such stock, etc. shall such stock, etc. shall
not fall under the not fall under the
following (a) and (b): following (a) and
(a) The internal (b):
control report (a) The internal
pertaining to the control report
business year pertaining to the
ending in the last business year
year contains the ending in the last
fact that year contains the
“appraisal results fact that
cannot be “appraisal results
provided “ cannot be
contained in; provided “
(b) The internal contained in;
control audit (b) The internal
report regarding control audit
the internal report regarding
control report the internal
pertaining to a control report
business year pertaining to a
ending in the last business year
year contains the ending in the last
fact that “no year contains the
opinion is fact that “no
provided “. opinion is

15 | P a g e
 provided “.
The financial statements, The financial statements,
etc for the business year etc for the business year
and consolidated and consolidated
accounting year ending in accounting year ending in
the last two (2) year as well the last two (2) year as well
as the quarterly financial as the quarterly financial
statements, etc. for a statements, etc. for a
8) Audit by a listed quarterly accounting period quarterly accounting period
company audit in the business year or for a in the business year or for a
firm quarterly consolidated quarterly consolidated
accounting year ending in accounting year ending in
the last year have undergo the last year have undergo
audit or quarterly review audit or quarterly review
equivalent to that in the equivalent to that in the
provision of Article 193-2 of provision of Article 193-2 of
the Act by a listed company the Act by a listed company
audit firm audit firm
Shareholder services have Shareholder services have
been entrusted to an been entrusted to an
institution specified as the institution specified as the
applicant’s shareholder applicant’s shareholder
services agent, or an services agent, or an
informal consent of informal consent of
9) Establishment
undertaking the undertaking the
of a
entrustment of such entrustment of such
shareholder
shareholder services from shareholder services from
services agent
the shareholder services the shareholder services
agent has been received; agent has been received;
provided, however, that the provided, however, that the
same shall not apply to a same shall not apply to a
shareholder services agent shareholder services agent
approved by the Exchange approved by the Exchange
The Share Unit shall be The Share Unit shall be
10) Share Unit
expected to be 100 shares expected to be 100 shares
11)Classes of stock In the case that a stock, etc. In the case that a stock, etc.
pertaining to the initial pertaining to the initial
listing application , such listing application , such
stock, etc. shall be, as a stock, etc. shall be, as a
general rule, any of stocks general rule, any of stocks
referenced in the following referenced in the following
a. through c. in this case, a. through c. in this case,
the initial listing applicant the initial listing applicant
for the stock referenced in for the stock referenced in
b. shall not have securities b. shall not have securities
other than said stock as to other than said stock as to
which the applicant makes which the applicant makes
initial listing application initial listing application
a) In the case of a a) In the case of a
company issuing one company issuing one

16 | P a g e
 class of stock with class of stock with
voting rights, said voting rights, said
stock with voting stock with voting
rights; rights;
b) In the case of a b) In the case of a
company issuing company issuing
multiple classes of multiple classes of
stock with voting stock with voting
rights, a class of rights, a class of
stock with voting stock with voting
rights whose value of rights whose value of
rights, etc. to receive rights, etc. to receive
economic benefits economic benefits
including claim for including claim for
surplus dividend surplus dividend
pertaining to the pertaining to the
number of shares number of shares
that enables exercise that enables exercise
of one voting right at of one voting right at
a general a general
shareholders shareholders
meeting with regard meeting with regard
to important matters to important matters
including selection including selection
and dismissal of and dismissal of
board members is board members is
higher than any higher than any
other class of stock; other class of stock;
c) Stock with no voting c) Stock with no voting
rights rights
Transfer of shares Transfer of shares
pertaining to an initial pertaining to an initial
listing application is not listing application is not
restricted or it is expected restricted or it is expected
that there will be no that there will be no
restriction by the time of restriction by the time of
listing; provided, however, listing; provided, however,
12) Restriction on
that the same shall not that the same shall not
transfer of
apply to cases where apply to cases where
shares
transfer of shares is transfer of shares is
restricted pursuant to the restricted pursuant to the
provisions of special laws at provisions of special laws at
the same time the details of the same time the details of
the restriction are deemed the restriction are deemed
not to hinder trading in the not to hinder trading in the
market of the Exchange market of the Exchange
13) Handling by The relevant issue is subject The relevant issue is
the designated to the book-entry transfer subject to the book-entry
book-entry operation of the designated transfer operation of the
transfer book-entry transfer designated book-entry

17 | P a g e
 transfer institution, or is
institution, or is likely to be
institution likely to be so by the time of
so by the time of the listing
the listing
14) Expected The merger, etc. shall not The merger, etc. shall not
implementatio fall under the following a. fall under the following a.
n of merger, etc and b.: and b.:
a. Where a merger, a. Where a merger,
demerger, making demerger, making
other company a other company a
subsidiary or making subsidiary or
a subsidiary a non- making a subsidiary
subsidiary or a non-subsidiary or
transfer of a business
transfer of a
to or form another
business to or form
entity is scheduled to
be carried out on or another entity is
after the initial scheduled to be
listing application carried out on or
day and within after the initial
two(2) years from listing application
the end of the most day and within
recent business year two(2) years from
before such day, and, the end of the most
in addition, where recent business year
the Exchange deems before such day,
that an initial listing and, in addition,
applicant will ceases
where the Exchange
to be a substantial
deems that an initial
surviving company
by such an act; listing applicant will
provided; ceases to be a
b. Where a merger in substantial surviving
which an initial company by such an
listing applicant act; provided;
becomes a b. Where a merger in
dissolution which an initial
company, a stock listing applicant
swap or a stock becomes a
transfer whereby it dissolution
becomes a wholly- company, a stock
owned subsidiary of
swap or a stock
another company is
transfer whereby it
expected to be
carried out within becomes a wholly-
two(2) years from owned subsidiary of
the end of the another company is
business year expected to be
immediately prior to carried out within
the business year two(2) years from
containing the initial the end of the
listing application
18 | P a g e
 business year
immediately prior to
the business year
day. containing the initial
listing application
day.

*1. Tradable Shares" refers to listed shares excluding shares held by parties with a
special interest such as officers, shares owned by the company itself, and shares held
by persons who individually own 10% or more of listed shares.
*2. 1 unit is the minimum number of shares necessary for 1 voting right.
Hong Kong Stock Exchange
Before you can list on the Hong Kong Stock Exchange, your company has to meet
certain criteria. The HKEx has two listing boards – the Main Board and GEM
(Growth Enterprise Market).
Main board listing criteria
The main listing criteria for the Main Board require:
 Trading record of at least three financial years
 Management has remained unchanged for the last two financial years
 Ownership remains unchanged for the latest financial year
 One of the following three tests must also be satisfied:
1) Profit test:
 Latest three years aggregate profit need to be equal or greater than
HKD 50 million of which the first two years had an aggregate profit
of at least HKD 30 million and the third year a profit of at least HKD
20 million; and
 Market capitalisation at the time of listing of at least HKD 500
million.
2) Market capitalisation/revenue test:
 Latest year revenue of at least HKD 500 million and market
capitalisation of at least HKD 4 billion.
3) Market capitalisation/revenue/cash flow test:
Market capitalisation of at least HKD 2 billion, revenue of at least HKD 500
million for the latest financial year and operating cash flow of at least HKD
100 million in the aggregate for the three preceding financial years.
 Management has remained unchanged for the last three years
 The company has at least 300 shareholders
 Ownership remained unchanged during the latest year
 Public float at least at 25%

A typical Main Board IPO has two tranches of offering:

19 | P a g e
 a) one offer tranche available to retail investors; and
b) one international offer or “placing” tranche available to institutional investors.

GEM listing criteria

The main listing criteria for GEM is more relaxed, and it requires:
 Latest two years aggregate operating cash flow of at least HKD 30 million
 Market capitalization of at least HKD 150 million
 Management has remained unchanged for the last two financial years
 Ownership remains unchanged for the latest financial year
 Public float at least at 25%

Circuit Filters
Stock Markets have the dubious reputation of crashing without a warning taking with
the savings of numerous investors. A stock market crash is a sudden dramatic decline
of stock prices across a significant cross-section of a market. Crashes are driven by
panic as much as by underlying economic factors.

The study is restricted to the performance of the Indian Stock market, Japan, Hong
Kong, and the New York Stock exchanges. Hence we will be concentrating on the
Covid-19 pandemic crisis, market liquidity crisis, etc.

As a counter measure to the instability of the stock market, various measures were
introduced by to avoid huge losses. One such solution is circuit breakers. Circuit
Breakers are “a point at which a stock market will stop trading for a period of time in
response to substantial drops in value”. They are also referred to as trading curb is
certain stock markets like DJIA and NYSE. This was first introduced after Black
Monday. Black Monday is the name given to Monday, March, 9, 2020 and Black
Thursday is the name given to Thursday, March, 12, 2020, when the Dow Jones
Industrial Average (DJIA) fell to 1.54%. This was done with an aim to avert panic in
the market and to avoid panic selling. The Circuit Filters operate according to the
rules and requirements of the stock Market in question.

Percentage Change to Trigger Circuit

Exchange
Breaker

Market Wide
3 stages- 10%, 15% and 20% of index movement
NSE
Individual Scrip (depending upon type of Scrip)
2%, 5% and 10% movement of individual scrip
Market Wide
3 stages- 10%, 15% and 20% of index movement
BSE
Individual Scrip (depending upon type of Scrip)
2%, 5% and 10% movement of individual scrip
Tokyo Stock Exchange 10%

20 | P a g e
 Hong Kong Stock Exchange 5%
NYSE 3 stage- 7%, 13% and 20% (set every quarter)
NSE

The index-based market-wide circuit breaker system applies at three stages of the
index movement, either way viz. at 10%, 15% and 20%. These circuit breakers, when
triggered, bring about a coordinated trading halt in all equity and equity derivative
markets nationwide. The market-wide circuit breakers are triggered by movement of
either the BSE Sensex or the NSE S&P CNX Nifty, whichever is breached earlier. In
this regard the Exchange has issued a circular no 85/2013 dated October 11, 2013.

Pre-open call
Trigger Market Halt
Trigger Time auction session
Limit Duration
post market halt

Before 1:00 pm. 45 Minutes 15 Minutes

At or after 1:00 pm upto
10% 15 Minutes 15 Minutes
2.30 pm
At or after 2.30 pm No Halt Not Applicable
Before 1 pm 1 hour 45 Minutes 15 Minutes
At or after 1:00 pm
45 Minutes 15 Minutes
15% before 2.00 pm
Remainder of the
On or after 2:00 pm Not Applicable
day
Any time during market Remainder of the
20% Not Applicable
hours day
Exchange shall compute the Index Circuit breaker limit for 10%, 15% and 20% levels
on a dai9ly basis based on the Previous day’s closing level of the index rounded off to
the nearest tick size.
In addition to this, there are also price bands for individual securities. Daily price
bands are applicable on securities as below:
 Daily price bands of 2% (either way) on specified securities.
 Daily price bands of 5% (either way) on specified securities.
 Daily price bands of 10% (either way) on specified securities.
 No price bands are applicable on scrips on which derivative products are
available or scrips included in indices on which derivative products are
available.
 Price bands of 20% (either way) on all remaining scrips (including debentures,
warrants, preference shares etc). The price bands for the securities in the
Limited Physical Market are the same as those applicable for the securities in
the Normal Market. For Auction market the price bands of 20% are
applicable.

21 | P a g e
  In order to prevent members from entering orders at non-genuine prices in
such securities, the Exchange has fixed operating range of 20% for such
securities.

BSE

Scrip wise Price Bands

1. For scrips (53 scrips) on which derivative products are available and scrips
which are included in indices on which derivative products are available,
there is no circuit filter. However, the Exchange has imposed dummy
circuit fitters on these scrips to avoid punching error, if any.
2. Other Scrips which are not included in above-mentioned category have a
circuit filter limit of 20%.
Market Wide Circuit Breakers
Based on SEBI Circular No. SMDRPD/Policy/Cir-37/2001 dated June 28, 2001,
the Exchange implemented index-based market-wide circuit breakers with effect
from July 02, 2001. SEBI vide its Circular no. CIR/MRD/DP/ 25 /2013 dated
September 03, 2013 has partially modified the provisions of the it
aforementioned circular and have introduced daily calculation of circuit breaker
limits for 10%, 15% and 20% based on the previous day's closing level of the
index. Additionally, a 15 minutes pre opening session post each trading halt has
been introduced.

Based on the said circular, the Exchange on a daily basis disseminates the 10%,
15% and 20% circuit breaker limits on the closing value of S & P BSE Sensex for
the next trading day. The rounding off the circuit breaker limits to nearest 25
points as prescribed in SEBI circular dated June 28, 2001 has been done away
with SEBI Circular dated September 3, 2013.

The index-based market-wide circuit breaker system applies at 3 stages of the

index movement, either way viz. at 10%, 15% and 20%. These circuit breakers
when triggered bring about a coordinated trading halt in all equity and equity
derivative markets nationwide. The market-wide circuit breakers are triggered by
movement of either the S & P BSE Sensex or the NSE CNX Nifty, whichever is
breached earlier.

Pre-Opening
Trigger Session
Trigger Time Halt Duration
Limit Duration post
each halt

10% Before 1:00 pm. 45 Minutes 15 Minutes

22 | P a g e
 At or after 1:00 pm upto
15 Minutes 15 Minutes
2.30 pm
At or after 2.30 pm No Halt -
Before 1 pm 1 hour 45 Minutes 15 Minutes
At or after 1:00 pm
45 Minutes 15 Minutes
before 2.00 pm
15%
Trading Halt for
On or after 2:00 pm the Remainder of -
the day
Trading Halt for
Any time during market
20% the Remainder of -
hours
the day

Tokyo Stock Exchange

Below applies with respect to the leading contract month of future contracts. In
the case where a buy (sell) order is placed (or executed) at the upper (lower) price
limit for the central contract month of a futures contract (excluding mini
contracts), and no subsequent trades are executed outside 10% of the daily price
limit range (JGB futures will be applied the dynamic circuit breaker range.) from
said upper (lower) price limit in the next minute, the trading of futures whose
underlying is the same as this central contract month (including mini contracts
and Rolling-Spot contracts) will be suspended and the upper (lower) daily price
limit range will be expanded. Price limits will be expanded in stages according to
CB trigger situation. Price limits will be expanded during the trading halt.
Hong Kong Stock Exchange

 New system will trigger multiple cooling-off periods, limiting price

movements within 5 per cent on either side of the last-traded price

 Hong Kong adopted a light-touch approach by implementing the circuit

breaker system in stages covering stocks, derivatives and futures products.

Hong Kong Exchanges and Clearing Limited (HKEX), the market operator, will
further expand its circuit-breaker mechanism to temper wild swings in the price
of futures contracts in Asia’s third-largest capital market.

The move will add to similar controls put in place since August 2016, first on
extreme gyrations in equities and a year later on derivative products. They
followed a series of events that provoked regulatory probes into market
misconduct such as price manipulation and pump-and-dump scandals.

NYSE

On the New York Stock Exchange (NYSE), one type of trading curb is referred to

as a "circuit breaker". These limits were put in place beginning in January 1988

23 | P a g e
(weeks after Black Monday occurred in 1987) in order to reduce market volatility
and massive panic sell-offs, giving traders time to reconsider their transactions.
The regulatory filing that makes circuit breakers mandatory on United States
stock exchanges is Securities and Exchange Commission Rule 80B. It is there that
the specifics of circuit breakers are elaborated and the various price limits are
outlined for investors to see.
The most recently updated amendment of rule 80B went into effect on April 8,
2013, and has three tiers of thresholds that have different protocols for halting
trading and closing the markets.
At the start of each day, the NYSE sets three circuit breaker levels at levels of 7%
(Level 1), 13% (Level 2) and 20% (Level 3). These thresholds are the percentage
drops in value that the S&P 500 Index would have to suffer in order for a trading
halt to occur. Base price levels for which these thresholds will be applied are
calculated daily based on the preceding trading day's closing value of the S&P
500. Depending on the point drop that happens and the time of day when it
happens, different actions occur automatically: Level 1 and Level 2 declines result
in a 15-minute trading halt unless they occur after 3:25pm, when no trading halts
apply. A Level 3 decline results in trading being suspended for the remainder of
the day.
There is a security specific circuit breaker system, similar to the market wide
system, that is known as the "Limit Up - Limit Down Plan" (LULD). This LULD
system succeeds the previous system that only prevented dramatic losses, but not
speculative gains, in a short amount of time. This rule is in place to combat
security specific volatility as opposed to market wide volatility. The thresholds for
a trading halt on an individual security are as follows. Each percentage change in
value has to occur within a 5-minute window in order for a trading halt to be
enacted:
 10% change in value of any security that is included in the S&P 500 index,
the Russell 1000 index, and the Invesco PowerShares QQQ ETF.
 30% change in value of any security that has a price equal to or greater
than $1
 50% change in value of any security that has a price less than $1
The previous trading day's closing price is used to determine which price range a
specific security falls into.

Trading And Settlement Cycle

This segment takes care of the efficiency issue of the said stock exchange. It
basically looks into the speed at which any of the numerous transactions affected
in the market gets settled. This is especially crucial given the volume. We see that
Indian exchanges are at par with the best in the world when it comes to efficient
settlement. It can even go one up if the proposed ‘T+1’system is put in place.
Below are the various settlement cycles for the stock exchanges.
Exchange Settlement Cycle

24 | P a g e
 NSE T+2
BSE T+2
NYSE T+2
Tokyo Stock Exchange T+2
Hong Kong Stock Exchange T+2

B. Quantitative Analysis

The hypothesis that the exchanges impact each other has been tested through
various statistical methods with data on price, returns collected from the
exchanges. Mainly the analysis used to validate the hypothesis are:
1. Correlation Analysis,
2. Exponential Trend Analysis, &
3. Risk-Return Analysis.

PRICE RELATIONSHIP
Correlation is a numerical summary measure that indicates the strength of
relationships between the pairs of variables. A correlation is very useful but it has
its limitations. That is, it can only measure the strength of a linear relationship.
The numerator of the above formula is also a measure of association between two
variables X and Y which is called the covariance between X and Y. Similar to
correlation, a covariance is a single number that measures the strength of the
linear relationship between the two variables. It is by looking at the sign of the
correlation or the covariance, i.e. positive or negative, that we can tell whether the
two variables are positively or negatively related.
Therefore the correlation is better because, unlike the covariance, the correlations
are not affected by the units in which the variables are measured. All the
correlations are between +1 and -1, inclusive. The sign determines whether the
relationship is positive or negative. The strength of the relationship is measured
by the absolute value or the magnitude of the correlation. The closer it is to +1 the
stronger the relationship is and the closer to zero indicates that there is
practically no linear relationship. At the extreme a correlation equal to1 -1 or +1
occurs only when the linear relationship is perfect. In this part the price data of
the various exchanges are collected and subjected to a correlation test in order to
find out the influence that they have on each other. In other words, an effort has
been made to gain insight into how far the price movements of the exchanges are
related with one another.

NSE vs NYSE
Fig 1.1

25 | P a g e
 Time Series Plot Of Close_NSE and Close_NYSE

40000

35000

30000

25000

20000

15000

10000

5000

0
08 08 08 09 09 10 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 18 19 19 20 20 20
/ 20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20
15 /7 24 30 16 18 /1 /2 21 17 /2 /2 21 /9 26 30 11 15 /7 /6 17 /1 20 15 12 /6 29 11
1/ 7 12/ 6/ 12/ 6/ 12 6 11/ 5/ 11 5 10/ 4 9/ 3/ 9/ 3/ 9 3 8/ 2 7/ 1/ 7/ 1 6/ 12/

YEAR
CLOSE NIFTY CLOSE DOW JONES

Here, NYSE was a success story in this period. Led by the tech companies, the US
economy was at its red which is reflected in the NYSE. But the NSE did not
appreciate much. In the NYSE the tech boom was saturating. The NYSE did not
appreciate much in the initial period. But in the year 2018 and start of 2020, NSE
was rising with the NYSE . The high dependence of India on the US in trade was
reflected by the two stock exchanges. During this period, both the stock
exchanges has risen sharply. Although the percentage change in the NSE was
much larger, but the manner in which they were moving was highly correlated.

NSE VS Hang Seng

26 | P a g e
 Fig 1.2

Time Series Plot Of CLose_NSE and Close_Hong Kong Stock Exchange

35000

30000

25000
20000

15000
10000

5000

0
08 08 08 09 09 10 10 11 11 12 12 13 13 13 14 14 15 15 16 16 17 17 17 18 18 19 19 20 20 21
/ 20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20
15 25 /4 /4 10 28 /4 16 24 15 23 /9 20 26 15 22 13 11 /4 19 /6 12 11 25 31 16 27 17 25 /1
1/ 6/ 12 6 11/ 4/ 10 3/ 8/ 2/ 7/ 1 6/ 11/ 5/ 10/ 4/ 9/ 3 8/ 2 7/ 12/ 5/ 10/ 4/ 9/ 3/ 8/ 2

YEAR

CLOSE NIFTY CLOSE HANGSENG

In Fig1.2, period 1 shows that there is almost no correlation between these two
exchanges. Hang Seng was declining very sharply because of the financial crisis.
Whereas India, not part of this story, remained almost untouched by this boom.
NSE is almost constant during this period. During period 2 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.

NSE VS NIKKEI 225

27 | P a g e
Fig 1.3

Time Series Plot Of Close_NSE and Close_Tokyo Stock Exchange

50000
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
08 08 08 09 09 10 10 11 11 12 12 13 13 13 14 14 15 15 16 16 17 17 17 18 18 19 19 20 20 21
/ 20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20
15 25 /4 /4 10 28 /4 16 24 15 23 /9 20 26 15 22 13 11 /4 19 /6 12 11 25 31 16 27 17 25 /1
1/ 6/ 12 6 11/ 4/ 10 3/ 8/ 2/ 7/ 1 6/ 11/ 5/ 10/ 4/ 9/ 3 8/ 2 7/ 12/ 5/ 10/ 4/ 9/ 3/ 8/ 2

YEAR

CLOSE NIFTY CLOSE NIKKEI 225

From the above graph, we can see the more volatility level in the Nikkei 225 index
because of recessionary conditions. NSE Index was merely very stable. Nikkei 225
index has given more returns with high risk. But, NSE has given moderate returns
with low risk compared to the Nikkei 225.

Table 1.

Stock Price Correlation among Stock Exchanges

Year/Variable HANG NIKKEI

NSE NYSE
s SENG 225

2008-2012
NSE 1.000
NYSE 1.000
0.2975
HANG SENG 0.3678 1.000
0.8529
NIKKEI 225 0.3157 0.6576 1.000
0.2548
2012-2016
NSE 1.000
NYSE 0.9177 1.000
HANG SENG 0.7482 0.7633 1.000
NIKKEI 225 0.8884 0.9587 0.7511 1.000
2016-2020
NSE 1.000
NYSE 0.965 1.000
HANG SENG 0.816 0.821 1.000
NIKKEI 225 0.875 0.924 0.860 1.000
2020-2021

28 | P a g e
 NSE 1.000
NYSE 0.951 1.000
HANG SENG 0.891 0.838 1.000
NIKKEI 225 0.962 0.929 0.868 1.000

EXPONENTIAL TREND

In contrast to a linear trend, an exponential trend is appropriate when the time

series changes by a constant percentage (as opposed to a constant amount) each
period. One important characteristic of exponential trend is that, if a time series
exhibits an exponential trend, a plot of its logarithm should be appropriately
linear. This equation can be interpreted that the coefficient b is approximately the
percentage change per period. Whenever there is a time series that is increasing
at an increasing rate or decreasing at a decreasing rate, an exponential trend
model proves apt.
In this context, the method has been used to understand the trend existing in the
movement of the exchanges and whether the trends have commonality. In other
words, an attempt has been made to find whether two or more exchanges follow
the same pattern in their movements of price and, if so, to what extent they are
related.

NSE Closing Price

Fig 2.1

CLOSE
18000 CLOSE NIFTY Exponential (CLOSE NIFTY )

16000

14000
f(x) = 0.19 exp( 0 x )
12000 R² = 0.86

10000

8000

6000

4000

2000

0
10/10/2006 7/6/2009 4/1/2012 12/27/2014 9/22/2017 6/18/2020 3/15/2023

29 | P a g e
NYSE Closing Price
Fig 2.2

CLOSE
CLOSE DOW JONES Exponential (CLOSE DOW JONES )
40000

35000

30000
f(x) = 0.39 exp( 0 x )
R² = 0.93
25000

20000

15000

10000

5000

0
10/10/2006 7/6/2009 4/1/2012 12/27/2014 9/22/2017 6/18/2020 3/15/2023

Hang Seng Closing Price

Fig 2.3

CLOSE
35000

30000

f(x) = 852.59 exp( 0 x )

25000 R² = 0.44

20000

15000

10000

5000

0
10/10/2006 7/6/2009 4/1/2012 12/27/2014 9/22/2017 6/18/2020 3/15/2023

CLOSE HANGSENG Exponential (CLOSE HANGSENG)

30 | P a g e
NIKKEI 225 Closing Price
Fig 2.4

NIKKEI 225
35000

30000

25000 f(x) = 0.97 exp( 0 x )

R² = 0.78
20000

15000

10000

5000

0
10/10/2006 7/6/2009 4/1/2012 12/27/2014 9/22/2017 6/18/2020 3/15/2023

NIKKEI 225 Exponential (NIKKEI 225 )

NSE has much larger rise which could not be captured in the exponential trend.
Tokyo Stock Exchange has also been explained by the exponential trend method
quite reasonably. Exponential trend has been able to capture the trend quite well
the changes in NYSE. R-square value is around 0.9279. This shows that the model
is able to explain the 60% of the variations of the index. For, the stock exchanges
Hong Kong have shown very high volatility over this period and have not risen
consistently enough. Thus exponential trend line is not able to explain the price
behaviour of these exchanges satisfactorily. The R-square values are very low 0.44
Hang Sang respectively.

RISK AND RETURN

This section tries to compare the various exchanges on the basis of returns and
the corresponding risks associated with it, returns being, perhaps, the single most
important factor affecting the performance of any index. While risk can be termed
as the major factor underlying all activity, it becomes imperative to compare the
exchanges based on this parameter. Table 2 exhibits the historical risk-return
figures of the exchanges.
Table 2.
Year/Variable
NSE NYSE Hang Seng Nikkei 225
s
Retur Retur
Risk Risk Return Risk Risk Return
n n
2008 14.04 54.49 6 -22 0.3 44.0 10 25
2009 15.18 2.97 23.6 -48.2 19.5 -44.9 55 18

31 | P a g e
 2010 26.38 -8.98 21.2 10.4 20 -47 15.3 2.2
2011 14.57 -87.28 3 25 1.7 25.6 0.4 2.0
2012 29.4 40.2 7 12 19 35 15 46
2013 0.31 25.60 7 53 17 14 7.7 67
2014 0.38 -41.76 12.9 -31.9 9.5 -42.3 21 51
2015 15.22 38.96 5.0 -32.1 10.3 20.7 12 14
2016 10.65 -31.73 21.7 -13.0 16 -82 30 -21
2017 3.95 45.37 3.3 14.1 8.9 52.4 1.4 -1.2
2018 11.88 27.53 35.4 -17.2 30.4 44.6 29.2 -53.9
2019 3 4 13.31 53.43 2.7 90.7 5 32
2020 23.3 36.7 10 14 24.6 -19.7 14.0 11.5
2021 22.01 24.13 9.7 -0.6 5.8 32.1 2 6

NSE seems to have followed or moved in tandem with the NYSE more after year
2009. Hang Seng exchange follows long cycles. If returns turn negative, they
remain negative for two or three years. Similarly if return turns positive, then
they remain so again for two or more years. Hang Seng has shown the highest
volatility as it is a much traded stock exchange. Also, the events like Sub-Prime
crisis have also affected the volatility of the exchanges. But, nevertheless, the
volatility has reduced in the recent years than it has in the past period. Yet, it is
more volatile than the other stock exchanges that we have compared. NYSE is a
mature and most stable market of all these.

Conclusions
The study brings forth some distinct conclusions many of which validate popular
beliefs. The objective of the whole research was to try and compare the various
stock exchanges based on certain parameters in order to understand the impact of
integration of the financial world on the various entities within it especially in the
context of globalization and increased interest in the capital markets fuelled by
surging growth.
The various research papers that have been studied traced the gradual ‘coming of
age’ of the Indian stock market over the past decade without actually arriving at
any conclusive evidence on the comparative position of our stock exchange with
that of other global ones. The studies mainly looked at various aspects of
efficiency in the stock market on a standalone basis and tried to draw conclusion
regarding the state of our maturity. However, we have tried to use the comparison
method to benchmark the performance of our stock market with that of a
selection of global stock exchanges on the basis of their diversity with respect to
geo-socio-politico-economy.
With regard to the initial hypothesis of this study, it is clearly found that the stock
markets do impact each other, more so in the recent times. This has been due to
the fact that ‘cross holdings’ are increasingly becoming common wherein the
geographical barrier is dissolving with respect to investing. In India also,
deliberations are on to ‘cross list’ Indian shares in Asian exchanges to start off.
This will increase the degree of integration manifold. Moreover, the automation

32 | P a g e
of the exchanges has played a vital role in making the financial markets
integrated. In this context, the pioneer is the Swiss exchange, followed by
Brussels as an early adapter. The spate of ‘ADR’s and ‘GDR’s, along with the
increased opening up of various economies, increasing foreign trade and the rise
of the ‘MNC’s have contributed immensely to the integration process. It leaves us
with the conclusion that the strategy of globally diversifying investments is slowly
losing its profitability. Especially after 2000, the markets are fast converging. It
has now become a global market operating 24 hours, with opening of markets in
different time zones at various points of time appearing to be seamless. Thus, in
hindsight, it would not be an exaggeration to say that the impact of the South
East Asian currency crisis, if happened today, would have much more drastic
effect on India, as the country is more in sync with the global markets. Actually, it
can be said that, in the current scenario, any apprehension about stocks in one
country can escalate into a panic selling. However, a caveat needs to be put here
with respect of the attractiveness of the global diversification strategy. In a way,
though the attractiveness of the strategy is gradually diminishing, it can still be
profitably used for investing in countries whose stock exchanges do not yet have
high correlation amongst each other. Moreover, although the stocks listed in the
stock exchanges of the sample in this study do impact each other and move in
tandem, the magnitude of that movement as a result of reacting to global cues
varies and, to that limited extent of variation, the global diversification strategy
can prove useful. In short, the ‘transaction cost’ for investment is coming down as
is ‘informational cost’.
Qualitatively, the comparison showed that Indian stock exchange has the
governance system and an efficient mechanism in place to be a world class
institute, specially the requirements of Clause 49 promulgated by SEBI and the
advanced trading and settlement mechanism of NSE, respectively. However,
unfortunately our implementation of the same remains a problem area with
almost 15-20% of the listed companies yet to align their operations as required
under the law.
Moreover, there are also issues regarding the extent to which the sophisticated
systems of the stock exchanges (NSE, BSE) are utilized in terms of the volume
and frequency of transactions and the range of instruments traded. The
commodity segment, derivatives and such other segments are yet to see activities
like the equity segment of the market. The reasons that can be attributed to this is
the fact that it has been only 5 years (derivatives started in 2000) that the various
segments, apart from equity and debt, have started operating and hence it is
reasonably nascent compared to its global counterparts. It would, therefore, not
be unjustified to say that the system is still evolving and it would take some time
not only to attain efficiency of operation, but also to generate increased interest
and awareness about the various other segments of the market. Then only can we
expect the operations to match its global counterparts in terms of volumes,
frequency and variety of instruments traded.
One more reason that can be attributed for the lag between a global benchmark
like NYSE and BSE or NSE can be the fact that, in our country, listing of foreign

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companies are still not allowed on the lines of ADRs or GDRs. This can be due to
lack of depth and breadth of the market. Again, as this study points out, the
listing criteria differ in terms of size as well as their disclosure norms. This
implies that the depth of the market judged by the total capitalization is less for
the Indian markets compared to its counterparts. Moreover, the disclosure norms
affect the governance aspect as also the information availability.
Innovative financial instruments like CAT Bonds, or dealing in Junk Bonds as a
cheap source of finance or sophisticated derivative instruments are yet to catch
up in our country. This is partly because of the regulations that are gradually
being eased out and also due to the risk appetite of the investors in this country.
The opening up of the economy and its subsequent impact on the financial sector
has only started barely in the last six years and, hence, the ‘teething problems’ of
initial skepticism, lack of awareness and interest exist, besides cautious approach
towards bringing about changes with keenly monitored impact of those changes.
If we go to the specifics, then we find that the Clause 49, our counterpart of the
famed Sarbannes-Oxley Act of USA, has brought us to the global standards. But,
because of the early stages (only a year), the implementation is causing a
hindrance in attaining the requisite level with regard to governance. Again the
risk management system in our country is very elaborate and the mechanism in
place is very efficient as also effective. It actually matches the level of a well
established benchmark like NYSE. However, the only difference is in terms of
risk appetite of the investors which causes the level and operation of ‘circuit
breakers’ to vary.
However, Indian stock market is very much at the same pedestal and, in fact,
better than most of its Asian counterparts especially the emerging economies.
Indian system enjoys creditability even when compared with a stock exchange
like Nikkei (Japan). If we look at the efficiency of trading captured by the ‘trading
and settlement’ mechanism, then we have found that the Indian mechanism is
faster than the NYSE and at par with the best in the world. In fact, it is one of the
fastest.
One problem area that came out as a possible barrier in the path of Indian stock
exchanges attaining global level is the fact that India has a very low rank in terms
of market capitalization (ranked 9th). All other stock exchanges that we used in
our study rank above Indian stock exchange. This is in spite of the fact that
Indian stock exchanges have the highest number of companies listed (around
9000) and BSE accounting for almost 69.08%. Therefore, volume-wise, Indian
market is still pretty small.
One more aspect that we have tried to look at in this study is the extent of
influence the various stock markets cast on each other, specifically the impact of
other stock exchanges on their Indian counterpart. In order to understand, we
divided our study period in parts based on certain events that had economic
implications. Here, we found the results validating popular belief that the
markets in general and Indian market in particular became more integrated with
other global exchanges from 2002-03. This can very well be seen since the South

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Asian crisis of the mid-late nineties barely affected us, particularly because we
were insulated due to government policies and were just making the transition.
However, in the later time periods, the influence of other stock markets increased
on BSE or NSE but at a very low - almost insignificant - level. At the time of
crucial 9/11, NYSE had started to exert its influence on us but at lower levels and,
though the economic downturn impacted, it did not last long. The increased
trend of Indian companies going for ADR and GDR issues has also contributed as
a channel for information transfer between the exchanges where the particular
company is listed. This has not only facilitated the integration process, but also
increased the sensitivity of the home country’s stock exchange to the movements
of various other exchanges especially where the home company is listed.

To Sum-Up
Finally, we can sum up with the following observations:
 The markets have indeed started to integrate and Indian market is no
exception especially after 2008-09.
 The regulatory authorities must remove any ambiguity that may be
existing when compared to the regulations of other exchanges before they
can actually make the grade.
 Lastly, although it has to be accepted that the market is evolving but the
Indian system has already attained the minimum level of robustness and
efficiency to be counted among the best in the world and stand equipped
to attain higher sophistication as well as heightened activities. As for the
existence of any signals or patterns among the stock exchanges, it can
safely be said that the markets do react to global cues and any happening
in the global scenario be it macro-economic or country specific (foreign
trade channel) affect the various markets.
In short, the Indian exchanges are ready to make the transition should the
government decides to further relax the regulations and open up. The financial
sector as a whole, with the stock markets as its indicator, has indeed come a long
way and are ready for the next level with regards to efficient trading and variety in
the instruments traded.
Thus this study validates the popular belief that the markets in general and
Indian market in particular is more integrated with other global exchanges from
2008-09 onwards. This can very well be seen since the Financial crisis of the
starting twenties barely affected us particularly because we were insulated due to
government policies and was just making the transition. However, in the later
time periods, the influence of other stock markets increased on our BSE or NSE,
but at a very low almost insignificant level. At the time of 9/11 incident, NYSE had
started to exert its influence on us but at lower levels and hence the economic
downturn did not impact for long. The increased trend of Indian companies going
for ADR and GDR issues has also contributed as a channel for information
transfer between the exchanges where the particular company is listed. This has
not only facilitated the integration process but also increased the sensitivity of the

35 | P a g e
home country’s stock exchange to the movements of various other exchanges
especially where the home company is listed. As for the existence of any signals or
patterns among the stock exchanges, it can safely be said that the markets do
react to global cues and any happening in the global scenario be it macro-
economic or country specific (foreign trade channel) affect the various markets.

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References
Articles
 Hansda, S. K., & Ray, P. (2002): ‘BSE and Nasdaq: Globalisation,
Information Technology and Stock Prices’, Economic and Political Weekly,
37 (5), February 2, 459- 468.
 Yakob, N. A., Beal, D., & Delpachitra, S. (2005) Seasonality in the Asia
Pacific stock markets. Journal of Asset Management, 6 (4), 298-318.
 Poshakwale, S. (2002). The Random Walk Hypothesis in the Emerging
Indian Stock Market. Journal of Business Finance & Accounting, 29
(9&10), 1275-1299.
 Dhal, J. R. (n.d.). Integration of India’s stock market with global and major
regional markets. 1- 35.
 Dr. M.V. Subha, M. S. (2010). A study on cointegration between indian and
american stock markets. JOURNAL OF CONTEMPORARY RESEARCH IN
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 Dr.N.M.Elango, K. a. (2011). An Efficient Approach to Forecast Indian
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 https://www.statista.com/statistics/270126/largest-stock-eschange-
operators-by-market-capitalization-of-listed-companies/
 https://hongkong.acclime.com/guides/hongkong-ipo-process/
 https://en.m.wikipedia.org/wiki/List_of_stock_exchanges
 https://www.helgilibrary.com/charts/which-country-has-the-most-
listed-companies/
 https://data.worldbank.org/indicator/
 https://en.m.wikipedia.org/wiki/BSE-Sensex
 https://en.m.wikipedia.org/wiki/BSE-Sensex
 https://en.m.wikipedia.org/wiki/NIFTY_50
 https://en.m.wikipedia.org/wiki/Nikkei_225
 https://en.m.wikipedia.org/wiki/Dow_Jones_Industrial_Average
 https://en.m.wikipedia.org/wiki/Hang_Seng_Index
 www.bseindia.com
 www.nseindia.com

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  www.jpx.co.jp
 www.nyse.com
 www.hkex.com
 www.finance.yahoo.com
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