Evaluating the impact of macroeconomic variable on indian stock market

Abstract

The prices of shares and other financial assets have constantly had a significant influence in the improvement and advancement of financial activities, and this has turned out to be clear ever. Macroeconomic factors show the prosperity of any economic system and determine the investment future. Macroeconomic factors influence pricing in any economy. Macroeconomic vulnerability influences stock and commodity market, which altogether decides price instability. The securities exchange is a basic stage in the money related arrangement of our nation as it assumes a major role in directing shortage area investment funds to the surplus part. The research examined the impact of certain macroeconomic factors (disposable revenues, interest rates, govt. policies, inflation and exchange rates) on the results of securities market performance in the National and Bombay stock exchanges. Thusly, the causal connection between the securities exchanges returns and chose macroeconomic factors in the NSE and BSE has been resolved in the investigation. The examination utilized the ADF, correlation, multiple regression and granger causality test for analyzing the association between the chose factors The study period was assessed by monthly data for 2006-2016. The findings showed that in the first difference the variables are stationary. There is a strong relationship exists between disposable income, government policies, the exchange rate and share price. This means that if these variables change, the stock prices of NSE and BSE will be affected. Furthermore, there is an unfavorable connection in the NSE and BSE between interest rate and inflation rate and share price, which means a shift in inflation and interest rate that will not have a strong impact on stock prices and will be in an adverse direction. In addition, a multiple regression that showed these variables was used to check the effect of selected macroeconomic factors on Indian stock prices. They have an influence on the NSE and BSE share prices.