Impact of Financial Integration in Developing Countries: A Study of Growth, Volatility and Efficiency in the Indian Stock Market

The objective of the present study is to examine, for India, the impact of financial integration on its capital market in terms of growth, volatility, and market efficiency. The results show that the primary stock market has grown significantly since the beginning of capital market reforms in 1992–93. The secondary capital market has also grown in terms of size and liquidity. The annual volatility in stock prices is found to have declined. Industry-wise volatility, as measured by ‘beta’, is found to be greater than unity after reforms mainly in metals and metal products, and finance and investment industries. The regression results do not support the random walk model of market efficiency.