Indian Capital Market in Post Globalization & Liberalization Era

The purpose of this paper is to provide depth information on the Indian Capital Market in the era of Globalization & Liberalization. Various factors contributing to the growth of the capital market in India Globalization and capital market reforms should result in improved market efficiency. This paper examines the efficiency of the Indian stock market from 19912002,The period which roughly coincides with the period after liberalization, globalization and initiation of capital market reforms. Runs tests and serial correlation tests of the BSE 200 index and 158 stocks support the view that the market is moving towards efficiency. However, efficiency increased in the period following reforms, but decreased slightly in the subsequent period. Volatility also decreased after the first few years and subsequently increased. This indicates that there is need for vigilance as the benefits of globalization and reforms can be diluted by inefficiency and volatility due to domestic and international events and market manipulation. Also, maximum departure from normality and efficiency was observed with daily data and minimum with monthly returns. This should be kept in mind when interpreting and comparing results from studies using varying data intervals. The objective of this study is to show the present status of Indian Capital Market and how it is gaining world wide acceptance. In the age of stiff competition gaining its momentum to the world financial markets in the race of highly regulated markets around the globe. In last decade or so, it has been observed that there has been a paradigm shift in Indian capital market. The applications of technology in the payment and settlement systems have made the Indian capital market comparable with the international capital markets. Now, the market features a developed regulatory mechanism and a modern market infrastructure with growing market capitalization, market liquidity, and mobilization of resources. However, the market has witnessed its worst time with the recent global financial crisis that originated from the US sub-prime mortgage market and spread over to the entire world as a contagion. The capital market of India delivered a sluggish performance. In this context, it is imperative to conduct empirical analysis to study the performance of Indian capital market. It is with this backdrop, this paper is an attempt to analyze the key market parameters such as market size, market liquidity, market turnover ratio, market volatility, and market efficiency of Indian capital market Key Words: SEBI, Capital Market, Globalization, Liberalization.