What is involved in forecasting Nifty?
Nifty is a well-diversified portfolio of companies that make up 54% of the market capitalisation of India. The diversification inside Nifty serves to “cancel out” influences of individual companies or industries. Hence Nifty, as a whole, reflects the overall prospects of India’s corporate sector and India’s economy. Nifty moves with events that impact India’s economy. These include politics, macroeconomic policy announcements, interest rates, money supply and budgets, shocks from overseas, etc. Shah & Thomas (1999c) offer some time-series econometrics applied to Nifty.
