Restricted accessResearch articleFirst published online 2025
Quantifying the Connectedness Between Different Segments of the Indian Capital Market Across Bearish,Bullish and Calm Market Scenarios: Evidence from ETFs in India
This study has employed the quantile connectedness approach to provide empirical evidence on the interrelationships among different segments of the Indian capital market represented by distinct exchange-traded fund (ETF) types. It explores spillovers among the broad index (NIFTYBEES and HDFCSENSEX), gold (GOLDBEES), debt (LTGILTBEES and EBBETF0425), sectoral (BANKBEES, ITBEES and INFRABEES) and thematic (Central Public Sector Enterprises [CPSEs] and environment, social and governance [ESG]) and beta ETFs (LOWIETF and SHARIABEES) in India from January 2021 to December 2024 across bear, calm and bull market regimes. Results reveal increased total connectedness among different segments during the bear and bull regimes compared to calm market scenarios. Consistent with past literature, the broad market ETF, namely NIFTYBEES, has been recorded as the net contributor to spillovers during all three market regimes. After NIFTYBEES, the thematic and smart beta ETFs (ESG ETF and LOWVOLIETF in particular) are also found to exhibit strong spillover activity, underscoring their rising influence on the overall market dynamics. Regarding receiving spillovers, CPSEs at the median quantile and EBBETF0425 and GOLDBEES at the extreme quantiles act as the net recipients of shocks, thereby indicating that GOLDBEES and EBBETF0425 act as shock absorbers for other ETFs. Investors can use these insights to refine their hedging strategies.
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