Conclusions and Suggestions:

The present study endeavored to explore dynamics of the stock price movement in the context of a developing country India. This study analyzed stock price movement and

interrelationship between the India stock market and world developed stock markets by using the daily data of BSE SENSEX (India), DJIA(USA), FTSE-100(UK) and Nikkei-225(Japan) divided into two parts from 1997 to 2002 and 2003-2007 for better results. The unit root test shows that all the series are integrated at order I(1) showing stochastic trend. The correlation matrix result shows positive correlation between India and other stock indices. The Indian stock market is statistically significantly cointegrated with the stock markets in USA, UK and Japan by using OLS estimation. The VAR (m) model is used to examine the long run

equilibrium relationship among the time series. There is evidence of interrelationship among the variables. The result shows the influence of USA market on India is more compare to other stock markets in recent years. The evidence of dynamic relationship helps investors in making efficient investment decisions in the India and other stock market.

Appendix: Graphs showing the trend in the stock price indices 1. Figure shows India stock return for 1997-2002 and 2003-2007

0

2. Figure shows Japan stock return for 1997-2002 and 2003-2007

60

1997 1998 1999 2000 2001 2002 JAPAN

1997 1998 1999 2000 2001 2002

INDIA

3. Figure shows UK stock return for 1997-2002 and 2003-2007

1997 1998 1999 2000 2001 2002

UK

4. Figure shows USA stock return for 1997-2002 and 2003-2007

6000

1997 1998 1999 2000 2001 2002 USA

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