Dynamic connectedness and spillovers across sectors: Evidence from the Indian stock market

We investigate stock market sectoral connectedness in India utilizing a time‐varying parameter vector autoregressive connectedness approach. Results show that stock market sectoral connectedness varies across time. Connectedness is strongest during the 2008 crisis, the double‐digit inflation and stock market crash of 2011, following the national elections of 2014, and the demonetization of 2016. Among sectors, consumers' spending, industry, finance, and basic materials are net transmitters of shocks, while information technology, fast‐moving consumer goods, health care, and telecommunications are net receivers. Findings can help formulate policies that alleviate sectoral imbalances and promote balanced growth. They are also useful for devising optimal portfolio diversification strategies.