Impact of Selected Macroeconomic Variables on Stock Market in India

Abstract

The key objective of this paper is to examine the long term relationship between selected external macroeconomic variables and different sectoral indices at National Stock Exchange (NSE). For the purpose of study five macro economic variables such as Exchange Rate (USD), Crude Oil prices, Foreign Institutional Investments, Current Account Balance and Foreign Exchange Reserves have been used to magnify the impact of external macroeconomic variables on different sectors of Indian economy represented by Sectoral Indices at National Stock Exchange (NSE) viz. CNX Auto, CNX Bank, CNX Energy, CNX FMCG and CNX IT. The monthly statistical data for above mentioned variables have been used for eight years covering the period from April 2005 to March 2013. In order to examine the relationship among these variables Multiple Regression equation model (Galton, 1877) has been employed using SPSS-16. The results so obtained reveal high correlation among the variables and suggest that amongst all macroeconomic variables only Foreign Institutional Investment (FII) affects all sectoral indices however rest of the macroeconomic variables selectively affect different sectoral indices in India.