ARE IT STOCKS DRIVING THE INDIAN EQUITY MARKET? A DYNAMIC CAUSALITY AND COINTEGRATION STUDY
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Abstract
This study examines the dynamic linkage between the Nifty IT index and the NSE Nifty 50 index using weekly data from April 2020 to March 2025. The Augmented Dickey-Fuller (ADF) unit root test reveals that both indices are non-stationary at level, with test statistics of −1.37 (Nifty 50) and −1.12 (Nifty IT), but become stationary at first difference, with significantly negative values of −9.82 and −15.63 respectively (p = 0.0000), confirming integration of order one, I(1). Johansen’s cointegration test indicates the existence of one long-run equilibrium relationship, as the Trace statistic (21.84216) exceeds the 5% critical value (15.49471) with a probability of 0.0031, supported by the Maximum Eigenvalue statistic (17.91432; p = 0.0127). Furthermore, Granger causality results demonstrate bidirectional causality between the indices, with Nifty IT Granger-causing Nifty 50 (F = 14.7826, p = 0.0002) and Nifty 50 Granger-causing Nifty IT (F = 6.9541, p = 0.0091). These findings confirm strong long-run integration and short-run interdependence, highlighting the systemic significance of the IT sector in influencing overall market dynamics in India.
Keywords
Nifty IT Index NSE Nifty 50 Cointegration Analysis Granger Causality
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Review Type:
Double-Blind Peer Review
License:
CC BY-NC 4.0
Volume/Issue:
Volume 02, Issue 02
Review Rounds:
2
Article Type:
Research Article
Publication Date:
Feb 26 2026
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V, L. B. (2026). Are IT Stocks Driving the Indian Equity Market? A Dynamic Causality and Cointegration Study. International Journal of Science, Strategic Management and Technology, 02(02). https://doi.org/10.55041/ijsmt.v2i2.013
V, Latha. "Are IT Stocks Driving the Indian Equity Market? A Dynamic Causality and Cointegration Study." International Journal of Science, Strategic Management and Technology, vol. 02, no. 02, 2026, pp. . doi:https://doi.org/10.55041/ijsmt.v2i2.013.
V, Latha. "Are IT Stocks Driving the Indian Equity Market? A Dynamic Causality and Cointegration Study." International Journal of Science, Strategic Management and Technology 02, no. 02 (2026). https://doi.org/https://doi.org/10.55041/ijsmt.v2i2.013.
References
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2.Bansal, R., & Arora, S. (2022). Foreign institutional investment and stock price dynamics in India. Global Business Review, 23(4), 812–828.
3.Bekaert, G., & Harvey, C. R. (2014). Emerging equity markets in a globalizing world. Review of Finance, 18(1), 1–33.
Brynjolfsson, E., & McAfee, A. (2017). The second machine age: Work, progress, and prosperity in a time of brilliant technologies. New York, NY: W.W. Norton.
4.Chatterjee, R., & Bose, S. (2020). Sectoral integration and market efficiency: Evidence from the Indian stock market. IIMB Management Review, 32(3), 234–246.
5.Diebold, F. X., & Yilmaz, K. (2012). Better to give than to receive: Predictive directional measurement of volatility spillovers. International Journal of Forecasting, 28(1), 57–66.
6.Fama, E. F., & French, K. R. (2015). A five-factor asset pricing model. Journal of Financial Economics, 116(1), 1–22.
Ghosh, S. (2017). Volatility spillover in Indian stock market: An empirical analysis. Applied Economics Letters, 24(8), 567–571.
7.Basha, S. M., & Ramaratnam, M. S. (2017). Construction of an Optimal Portfolio Using Sharpe's Single Index Model: 8.A Study on Nifty Midcap 150 Scrips. Indian Journal of Research in Capital Markets, 4(4), 25-41.
9.Krishnamoorthy, D. N., & Mahabub Basha, S. (2022). An empirical study on construction portfolio with reference to BSE. Int J Finance Manage Econ, 5(1), 110-114.
10.Mohammed, B. Z., Kumar, P. M., Thilaga, S., & Basha, M. (2022). An Empirical Study On Customer Experience And Customer Engagement Towards Electric Bikes With Reference To Bangalore City. Journal of Positive School Psychology, 4591-4597.
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