Dissecting Volatility: Do Sectoral Dynamics Drive the Nifty 50 Index? A GARCH Family Approach
DOI:
https://doi.org/10.5281/zenodo.16559331Keywords:
Volatility clustering, GARCH, EGARCH, Sectoral dynamics, ARCH effect, Positive shocks, Negative shocks, leverage effect.Abstract
Volatility in financial markets is crucial factor impacting portfolio management and investment decisions. This study investigates the impact of sectoral dynamics on Nifty 50 volatility using GARCH family models. Daily log returns of Nifty50, Bank nifty, Fin nifty and Nifty midcap is taken over a one-year sample period. Result shows the existence of ARCH effect, with volatility responding to past shocks. GARCH results shows that sectoral log returns do not significantly impact the nifty50 volatility. EGARCH effects shows significant leverage effect indicating negative shocks have more impact on volatility than positive shocks.
References
Gupta, P. K. (2024). Analysing the dynamic interrelationship between Nifty Fifty and sectoral indices daily returns of NSE. International Research Journal of Modernization in Engineering, Technology and Science, 6(9), 3311–3323. https://www.irjmets.com/uploadedfiles/paper//issue_9_september_2024/61489/final/fin_irjmets1728275107.pdf
Mukherjee, T., & Mandal, S. (2024). Impact of market volatility on NIFTY 50 returns: An empirical study. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4964444 SSRNSSRN
Naveen Kumar, P., & Minithra, R. (2021). Estimation of price volatility of Nifty 50 index using ADF and GARCH (1,1). Indian Journal of Economics and Development, 17(2), 480–485. https://doi.org/10.35716/IJED/20286soed.in
Palanisamy, K., & Parthasarathy, K. (2016). Stock returns and volatility: Evidence from Nifty 50 index. Asian Journal of Research in Social Sciences and Humanities, 6(5), 434–442. https://doi.org/10.5958/2249-7315.2016.00127.1ResearchGate
Paientko, T., & Pundir, R. R. K. (2024). Volatility analysis of the Indian stock market: Insights from Bank Nifty index and futures trading. Journal of Intercultural Management, 16(4), 5–41. https://doi.org/10.2478/joim-2024-0013SciendoIDEAS/RePEc
Shankar, R., & Gopal, L. N. (2021). Volatility analysis of select blue chip companies listed in Nifty 50 index of India. Revista GEINTEC – Gestão Inovação e Tecnologias, 11(4), 104–115. https://doi.org/10.47059/revistageintec.v11i4.2096
Sujyothi, M., & Suresh, A. S. (2024). Analysing the causal relationship between Nifty 50 and sectoral indices. Journal of Emerging Technologies and Innovative Research, 11(5), 256–264. https://www.jetir.org/view?paper=JETIR2405432
Vevek, S., Selvam, M., & Sivaprakkash, S. (2022). The persistence of volatility in Nifty 50. Indian Journal of Research in Capital Markets, 9(2–3), 8–18. https://doi.org/10.17010/ijrcm/2022/v9i2-3/172549
Downloads
Published
Issue
Section
License
Copyright (c) 2025 K A Dhanya
This work is licensed under a Creative Commons Attribution 4.0 International License.