Beyond the Silicon Valley of the East: Exploring Portfolio Diversification with India and Mint Economies

Abstract

In the past few decades, India’s tech industry has boomed, making it a leader in the digital world. Today, India has many big tech companies, well-trained software developers, and cutting-edge technology like AI and cloud computing. This success shows India’s innovative spirit and makes the country a good example for other developing nations. However, global portfolio managers often overlook potential diversification opportunities beyond India’s dynamic stock market. This study investigates the viability of MINT (Mexico, Indonesia, Nigeria, and Turkey) as diversification targets, specifically analyzing spillover effects and volatility dynamics between their stock markets and that of India. Leveraging vector autoregressions (VARs) and dynamic conditional correlation (DCC)–GARCH models, we uncover intricate relationships. Further, DCC–GARCH analysis reveals varying degrees of volatility spillover, offering valuable insights for risk management. Our findings suggest that MINT economies, particularly Mexico and Turkey, hold promise for Indian portfolio diversification. By strategically incorporating these markets, investors can potentially mitigate India-specific risks and enhance portfolio returns. We urge global portfolio managers to consider Turkey as a viable diversification avenue, acknowledging the nuanced market growth dynamics highlighted in this study. © 2024 by the authors.