Theoretical and Applied Economics
No. 3 / 2020 (624), Autumn
Macroeconomic variables and market expectations: Indian Stock Market
Birla Institute of Technology and Science (BITS), Pilani, India
Arya KUMAR
Birla Institute of Technology and Science (BITS), Pilani, India
Abstract. Purpose: This study attempts to explore the relationships among stock market, investor sentiments and economic activity in Indian context. The study investigates the relationships between the Indian stock market prices (NSE Nifty 50; NSE 100 and NSE 500) and significant macroeconomic variables, along with market expectations measured by Volatility Index (VIX).
Design/methodology/approach: Monthly time series data spanning from March 2009 to March 2017 has been used. The unit root test for stationarity, ARDL bound test for co-integration and Granger Causality have been employed to study the short run and long run dynamics.
Findings : The findings of the study confirm the existence of co-integration among the variables, indicative of a long-run relationship. The long-run coefficients suggest Indian share prices are influenced positively by FIIs, Volatility Index and Inflation and negatively by Crude Oil Prices, Gold Prices and Exchange Rate. Money supply, Call Money Rate, Gross Fiscal Deficit and Index of Industrial Production prove to be insignificant in affecting the stock prices for all three indices. In Granger causality sense, it was found that the stock prices Granger Cause Crude Oil, Exchange Rate and Industrial Production for all three indices. It was also found that Exchange Rate and VIX Granger cause stock prices for NSE50 and NSE100. But for NSE500, the causality runs from stock prices to VIX.
Originality/value: This study emphasizes the impact of macroeconomic variables and investor sentiments on the stock market in a developing economy.
Contents
Social protection systems and economic growth
Analysis of the impact generated by COVID-19 in banking institutions and possible economic effects
Covid crisis: Fiscal, monetary and macro-financial policy responses
Simulation of financial contagion effect using the NetLogo software at the level of the banking network
Impact of education and government effectiveness on the shadow economy
Financial development and income inequality: An empirical analysis on the emerging market economies
Aspects and evolutions specific to monetary policy in Romania. A complex topical analysis
Foreign trade policy and economic growth: Indian evidence
The effect of external debt on long run economic growth in developing economies: Evidence from heterogeneous panel data models with cross sectional dependency
Structural modeling of fiscal structure for policy analysis: A case study of India
Macroeconomic variables and market expectations: Indian Stock Market
Relationship analysis of stocks prices and exchange rates of three leading Asian economies
Bitcoins as a determinant of stock market movements: A comparison of Indian and Chinese Stock Markets
The causal relationship between Indian energy consumption and the GDP: A shift from conservation to feedback hypothesis post economic liberalisation
The dependence and dynamic correlation between Islamic and conventional insurances and stock market: A multivariate short memory approach
Does exchange rate has any impact on economic growth in India? An empirical analysis
Corruption, technological innovation and environmental quality in South Asian countries: An empirical insight
Analysis of the quarterly evolution of the Gross Domestic Product
The main theoretical aspects regarding the capital adequacy models
Considerations regarding the effects of COVID-19 on the tourism market