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- Title
Relevance of Macro Economic factors for the Indian Stock Market.
- Authors
Srivastava, Aman
- Abstract
Stock market is an important segment of the financial system of any country as it plays an important role in channelizing savings from deficit sector to surplus sector. These stock markets have always been an area of serious concern for policy makers, economists and researchers. They are often defined as the barometer of any economy because they reflect the change and direction of pressure on the economy. The movement and volatility in stock markets often reflect the direction of any economy. The available literature suggests that since the inception of stock markets researchers are making attempts to establish relationship between change in macroeconomic factors and stock market returns. There are various models developed so far by scholars globally for establishing the relationship between stock returns and these factors such as - discounted cash flows model (DCFM), the capital asset pricing model (CAPM), and the arbitrage-pricing model (APM). But these existing models also suffer from many limitations based on the concept of market equilibrium and the existence of a perfect market. In many developing countries, there are market imperfections and other market characteristics, which make the existing models unsuitable for developing countries like India. From the literature review, the study has seen that asset-pricing theories do not specify the fundamental macroeconomic factors that affect securities prices. The purpose of this paper is to investigate the impact of change in macroeconomic factors on the Indian stock market. The findings of the study conclude that emerging economies like India in long term are more affected by domestic macroeconomic factors than global factors. The main domestic macroeconomic factors affecting the stock market in long run are industrial production; wholesale price index and interest rate.
- Subjects
INDIA; STOCK exchanges; ECONOMIC activity; ECONOMIC impact; ECONOMIC models; INDUSTRIAL productivity
- Publication
Decision (0304-0941), 2010, Vol 37, Issue 3, p69
- ISSN
0304-0941
- Publication type
Article