The theory of decoupling suggested that emerging markets have broadened and deepened to a point where they no longer depend on the US for growth, leaving them insulated from a recession in the US. This article examines if this adage holds good in the wake of the global financial crisis. It specifically examines if the performance of the Indian stock market index is `decoupled' from the major global indices.

The Indian stock market's performance peaked in January, 2008, when the Sensex was above 21,000 points and the Nifty was trading around the 6,000 level. A couple of months later, the subprime crisis that originated in the US began to take its toll of the economies worldwide. Currently, all the major markets in the world are down by more than 60%, compared to their peak levels. The Indian stock market has also been affected by this global turmoil and the markets have also lost almost 60% of their value, compared to that during their peak levels. Today, the Sensex and the Nifty are trading near around the 10,000 and 3,000 marks respectively.

Analysts are now busy studying the movement of the US stock market, i.e., Dow Jones, NASDAQ and S&P 500, and then are analyzing the impact of this on the Indian stock market performance. It has been observed that the Indian markets, at the beginning of the trading session, are reacting to the performance of the US markets. Later, during the mid-period of the trading session, when the European markets open, i.e., CAC 40, DAX and FTSE, the Indian markets are following the performance of the European markets. Thus, the performance of the Indian markets can be predicted by gauging the performance of the US and other markets. This article studies the impact of the global markets, i.e., the US and the other major markets, on the Indian stock market and analyzes if the Indian markets follow the global cues.

For this study, the data pertaining to the stock market indices, of the major global markets, Dow Jones, NASDAQ Composite, Nikkei, Hang Sang, CAC40, FTSE100, Sensex and CNX Nifty 50 pertaining to the last one year, i.e., from May 2008 to April 2009 has been taken. The opening index represents the value of the index on the first day of that month, while the closing index, the value on the last day of that month.

Portfolio Organizer Magazine, Global Cues, Emerging Markets, Global Financial Crisis, Indian Stock Market Index, US Stock Market, European Markets, Global Markets, Weak Global Economy, Economic Recession, Globalization, Credit Rating Agencies, Gross Domestic Product, GDP.