An Impact of ICT on the Growth of Capital Market-Empirical Evidence from Indian Stock Exchange

Abstract

This paper examines the impact of ICT on the growth of the Indian Stock Exchange using a modified version of the Gompertz technology diffusion model introduced by Chow (1983) and therefore rearranges the model such that ICT development becomes the independent variable while stock market growth indicators are the dependent variables. Capital markets have become excessively volatile since the adoption of computer assisted trading strategies as the latter increase short-term price volatility and risks. Fama and French (1988) argued that information technology have made capital markets more efficient as attendant stock prices now reflect important information and investors’ perception of stocks more swiftly. The data in the present study is obtained from BSE and NSE stock exchanges database, MCX India database, Securities and Exchange Commission and websites of World Development Indicators. In the course of analysis, market capitalization model, stock market value traded model, stock market volume traded model, turnover model, number of securities listed model, public sector bond model and private sector debt model has been designed. The results disclose that selected variables are significantly affected by information and communications technology especially in respect of increase in the number of stockbrokers, investors and access to ICT. Information Technology have contributed to growth of the Indian Capital Market, with the effect mostly seen in the availability of information to investors and the improvements in the trading patterns of the Indian Stock Exchange.

Keywords: Indian stock market, ICT, Gompertz model, macroeconomic variables