Globalization of world economies have ushered in a sea change in the financial architecture of economy. The presence of foreign institutional investors has strengthened the integration between the domestic and international capital markets. The international capital market facilitated cross-country financial flows, which contribute to a more efficient allocation of resources. The analysis on international financial market has come to the fore since this is the most sensitive segment of the world economy and it is through this segment that the country's exposure to the outer world is most readily felt. Keeping this in view, the present study analyzes the relationship between emerging market and developed market movement in the global context. The study also used a single factor, i.e., International Capital Asset Pricing Model, to determine the returns of emerging and developed market, to test joint integration and asset pricing in terms of world index. It also highlights the significance of integration and segmentation of emerging and developed market with greater confidence and resource strength.

The past 25 years have witnessed a process of accelerating change in the world's financial markets. Driven by an interacting process of liberalization and innovation, regulations have been removed; new products have emerged in the market. The developing countries have found new ways to mobilize domestic and international savings. The dynamics of globalization is now a major force in shaping development of nations, where capital formation plays an important role in the development. To overcome the vicious circle of low capital formation and low growth, developing countries seek to look for help from external sources. Foreign capital fills the resource gap of developing countries. In recent years, there is a trend towards internationalization of financial markets. Financial integration leads to rapid flows of funds from `less returns markets' to `high returns markets' and in this process it brings about equality in returns. Financial integration depends upon the flow of funds from one market to another and from one country to another. The increased flow of funds in the international financial market is due to techno-financial innovation. In April 1992 the Government permitted Indian companies to raise equity capital by issuing their programs in the international financial markets. The emerging markets are an increasing part of today's investment opportunities. Emerging stock markets play an increasingly important role in developing countries. The developing economies have now become market-oriented in approach. So, integration of emerging markets with developed markets is of global interest.

Integration is a process by which segmented markets become open and unified so that participants enjoy the same unimpeded access to international trade and finance. Beginning with the work of Black (1974) and Stulz (1981), lots of empirical studies have been undertaken to analyze the effects of international capital market segmentation/integration. Stehle (1977) is the first researcher to test the issue of segmentation versus integration, empirically.