AN ANALYSIS OF THE MACROECONOMIC FACTORS- AN IMPACT ON INDIAN STOCK MARKET

Abstract

India's economic process has positioned it together of the world's fastest-growing economies, with the country predicted to be among the highest three within the next decade. Despite a slowdown in Indian corporate earnings thanks to excess existing capacity and banks' inability to lend, the stock exchange, specifically the Bombay stock market, has performed well. The aim of this study is to ascertain if there's a link between the BSE Sensex and macroeconomic variables just like the Index of commercial Production (IIP), inflation, and rate of interest, gold price, rate of exchange, FII, and funds for the amount April 1999 to March 2017. Supported the tests of Johansen Co-integration, Granger Causality, and therefore the Vector Error Correction mechanism, the study also aims to work out the strength of the link between the independent parameters and therefore the dependent parameter, namely the BSE Sensex, within the short and end of the day. The Vector Error Correction Model (VECM) confirms that the Index of commercial Production (IIP), inflation, interest rates, gold prices, rate of exchange, international institutional investment, funds, and therefore the BSE Sensex have a long-run causal relationship. It proves that there's a short-run causality between inflation and therefore the BSE Sensex, also as between funds and therefore the BSE Sensex. The findings show that the BSE Sensex influences the rate of exchange, funds, FII, gold prices, and IIP.