Multivariate Analysis to get an Estimate of the Indian Stock Market Nifty Index

Research Paper (postgraduate) , 2011 , 20 Pages , Grade: 1

Business economics - Banking, Stock Exchanges, Insurance, Accounting

The Indian stock market S and P CNX Nifty Index (Nifty) is a well diversified index of 50 companies. Foreign Institutional Investors (FII’s), wield significant influence over daily trading volumes in both the spot and derivative segments in the Indian markets. This tends to impact market volatility and returns. This study attempted to study the effect of FII transaction amounts, derivative turn over amounts and volatility on the performance of the Nifty index. A strong correlation was observed between derivative turnover and the Nifty but the correlation was relatively weaker between the Nifty and FII transaction amounts and Volatility. FII and F&O activity established important tops ahead of major tops in the Nifty. Volatility remained low during periods of significant upside in the stock market but spiked up during market declines. Linear and Non-linear models using multivariate analysis were fit to estimate the Nifty from the respective independent variables. A non linear model involving all three variables provided the best fit and the least deviation from actual values suggesting that interplay of these and other factors drive the performance of the index.
Keywords: Nifty, FII transaction amounts, F&O turnover, Volatility, Nifty forecasting, Linear and Non Linear Models.

Inhaltsverzeichnis

• Abstract
• 1. Introduction
• 2. Literature Review
• 3. Data and Methodology
• 4. Results and Discussion
• 5. Conclusion
• References

Zielsetzung und Themenschwerpunkte

This study aims to analyze the impact of Foreign Institutional Investor (FII) transaction amounts, derivative turnover (Futures and Options - F&O), and volatility on the performance of the Nifty index, a key benchmark for the Indian stock market. The study seeks to develop models to estimate the Nifty index based on these parameters.

• The influence of FII activity on the Nifty index
• The role of derivative turnover in Nifty index performance
• The relationship between volatility and Nifty index movements
• Development of linear and non-linear models to estimate the Nifty index
• Analysis of the predictive power of the developed models

Zusammenfassung der Kapitel

The introduction provides an overview of the Nifty index, its significance in the Indian economy, and the factors that influence its movements. It highlights the importance of FII activity, derivative turnover, and volatility in understanding the Nifty's performance.

The literature review explores existing research on the Nifty index, focusing on the impact of fundamental and technical factors, FII flows, and derivative trading. It examines the debate on whether FII flows are a cause or effect of market returns and the role of derivatives in mitigating volatility.

The data and methodology section details the data sources, variables used, and the statistical techniques employed in the study. It explains the process of collecting and analyzing data on FII transactions, derivative turnover, volatility, and the Nifty index.

The results and discussion section presents the findings of the study, including the correlation between the independent variables and the Nifty index. It analyzes the performance of the linear and non-linear models developed to estimate the Nifty index and discusses the implications of the results.

Schlüsselwörter

The keywords and focus themes of the text include the Nifty index, Foreign Institutional Investors (FII), derivative turnover (Futures and Options - F&O), volatility, Nifty forecasting, linear and non-linear models, and the Indian stock market.

• Grade: 1
• Author: Rajveer Rawlin (Author)
• Publication Year: 2011
• Pages: 20
• Catalog Number: V182366
• ISBN (eBook): 9783656063612
• ISBN (Book): 9783656063858
• Language: English
• Tags: multivariate, analysis, estimate, indian, stock, market, nifty, index