Regime-Dependent Integration, Connectedness and Contagion Between India and Global Equity Markets

Abstract

The present study examined the dynamics of equity-market integration among India and five major global economies: China, Hong Kong SAR, Japan, the United Kingdom and the United States. Daily data were analysed for the period from January 2002 to December 2025. This study employs Johansen co-integration and the Granger causality test, along with a DCC-GARCH model and the Diebold–Yilmaz connectedness approach, to estimate time-varying conditional correlations across crisis regimes. The findings reveal a single long-run co-integrating relationship in the pre-COVID-19 period (2002–2019) that weakens to none when the post-COVID-19 period (2020–2025) is investigated in isolation, suggesting that the intense early-pandemic coupling became moderated as monetary-policy cycles diverged. The Granger causality test showed that the United States consistently and unidirectionally drives the Indian market, while India’s pre-crisis role as a transmitter to Asian markets fades after the pandemic. The DCC-GARCH indicated that India’s conditional correlations with selected economies rose sharply during the 2008 and 2020 crises, peaking with Hong Kong SAR (0.64). The DY connectedness framework reinforced this pattern. Systemwide connectedness rose sharply during both crises, exceeding 57%, compared to roughly 45% in calmer phases. The United States emerged as the key net transmitter of shocks, and India acted as a net receiver.