Journal Press India^®

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The associations between the fluctuations in stock market returns and the macro economic variables have been instrumented many times in the previous literature. It has also been argued that the macroeconomic variables play a significant role in determining the stock market returns. Thus the current paper attempts to examines the relationship between Indian stock market returns (explained by Nifty 50) and four major macroeconomic variables namely, Consumer Price Index (CPI), Index of Industrial Production (IIP), Exchange Rate (ER) and Foreign Exchange Reserve (FX). For the analyses of the objective, the data for a period of eighteen years (2000-2017) have been taken into consideration. To estimate the relationship, descriptive statistical tools and statistical techniques like Augmented Dickey Fuller (ADF) test and OLS were employed. The result of the analysis established that the macroeconomic variables bring about significant impact on the Indian stock market returns. The study also established that there exists a unidirectional relation between Forex and CPI, IIP and CPI, Nifty and CPI, IIP and Forex, Nifty and IIP.

Keywords

Macroeconomic variables; Stock market prices; Unit root test; OLS

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