The relationship between macroeconomic factors and stock market indices performances in Indian stock market

Abstract

This study attempts in empirically testing the relationship between macroeconomic factors and the performances of two major Indian security market indices of BSE-Sensex and NSE- nifty. The yearly data of several macroeconomic factors of FIIs net investment, exchange rates, oil price, interest rates, inflation rates and gold rates from 1995-96 to 2014-15 are taken into consideration and it tries to reveal the most influence of these factors on the 'Stock indices performances' of the Indian stock market. In pursuance of this, the correlation analysis and multiple regression analysis was used to study the relationship between the two selected security market indices performances and the six selected macroeconomic factors from the Indian economy. The major finding is that macroeconomic factors influence stock market indices performances in India. It is recommended that the implementation of suitable economic policies will be beneficial to the stock market indices and it will result in needed growth in the Indian capital market.