Why They Don’t Directly Follow Each Other
- Different Economies: Nifty reflects India’s economic health, while DJIA mirrors the US. Their individual growth trajectories and sensitivities to factors like interest rates and inflation differ.
- Compositional Contrast: Nifty focuses on 50 major Indian companies, while DJIA comprises 30 large US firms. This difference in sectoral exposure and risk profiles leads to independent reactions to events.
- Global Influences: Both markets dance to the tune of global factors like economic trends, geopolitical events, and investor sentiment. However, the impact of these factors can vary depending on each economy’s relative strength and specific vulnerabilities.
Does Nifty Follow Dow Jones?
The Indian stock market, represented by the Nifty 50, and the American giant, the Dow Jones Industrial Average (DJIA), are often compared and contrasted. But one question frequently pops up: Does the Nifty follow the Dow Jones?
The answer, like most things in finance, isn’t a simple “yes” or “no.” It’s a tango of correlation, not causation.
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