Author(s)
Arun Chandran
- Manuscript ID: 140531
- Volume: 2
- Issue: 6
- Pages: 1439–1454
Subject Area: Management
Abstract
This study examines the dynamic interplay between NSE sectoral indices—specifically Nifty IT, Bank Nifty, Nifty FMCG, and Nifty Pharma—and India's macroeconomic growth over the period 2004–2024. Employing a suite of advanced econometric methods, including Augmented Dickey-Fuller (ADF) unit root tests, Johansen cointegration analysis, Vector Error Correction Modeling (VECM), Granger causality tests, and impulse response functions, this paper investigates both long-run equilibrium relationships and short-run dynamic adjustments between sectoral equity performance and real GDP growth. The study finds strong evidence of long-run cointegration between all four sectoral indices and GDP, with the banking and financial services sector exhibiting the highest degree of integration. Bidirectional Granger causality is confirmed between Bank Nifty and GDP, while unidirectional causality from GDP to Nifty IT is observed. The FMCG sector emerges as a countercyclical indicator, whereas the pharma sector demonstrates structural resilience across all macroeconomic regimes. The paper further documents a dramatic expansion of India's market capitalisation-to-GDP ratio from approximately 52% in 2005 to over 131% in 2024, reflecting deepening financial intermediation. These findings carry significant implications for portfolio allocation, sectoral investment strategy, and economic policymaking in an emerging market context.