Are the Bombay stock Exchange Sectoral indices of Indian stock market cointegrated? Evidence using fractional cointegration test

The present study is an attempt to test whether sectoral indices of Bombay stock Exchange have diversification benefits in the same. For the analysis, we used daily data spanning from 2/1/1999to 3/31/2011. To test our hypothesis we used Fractional cointegration test. Study found that, ingeneral, no evidence of cointegration in the sectoral indices of Bombay stock Exchange and hence conclude that there is benefit to domestic investors for sectoral diversification in the Bombay stock Exchange Sectoral indices of Indian stock market.