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Nexus between Stock Market Returns and Economic Variables: Evidence from India

Vol 4, Issue 1, January - June 2017 | Pages: 70-85 | Research Paper  

 
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https://doi.org/10.17492/mudra.v4i01.9777


Author Details ( * ) denotes Corresponding author

1. Vanitha Chawla, Assistant Professor, Department of Commerce, shivaji college, Delhi, India (vanitha_2182@yahoo.co.in)
2. * Shweta Gautam, Assistant Professor, Department of Commerce, Shivaji College, University of Delhi, Delhi, India (shweta.shweta.gautam@gmail.com)

The paper examines the impact of selected macroeconomic variables on the Indian stock market. The macroeconomic variables used in the study are interest rate, exchange rate, index of industrial production (IIP) and gold price. BSE Sensex is used as proxy for Indian stock market. We have used the monthly data for all the variables from January 2001 to December 2016. Regression analysis and Granger Causality test is used to establish the relationship between the stock market and macroeconomic variables. The results show significant impact of only exchange rate on stock returns. All the other variables have shown insignificant impact on the stock market returns. The results of Granger causality test show unidirectional relationship between exchange rate and stock prices and bi-directional relation between IIP and SENSEX.

Keywords

Stock market; Interest rate; Index of Industrial Production (IIP); Exchange rate; BSE Sensex; Granger Causality

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