Macro economic factors

Will be related only till 2017

1. Macro economic Variable and Stock Market By: Vinu Arpitha KS [16dm020]

2. Content Introduction Methodology Objectives Limitations Macro Economic Factors

3. Introduction Movement of stock indices is responsive to changes in macroeconomic fundamentals. The objective of this study is to find the relationship between macroeconomic variables which are considered as the independent variables and stock prices in Bombay Stock Exchange (SENSEX), India which is the dependent variable. The study considers annual data of several macroeconomic variables from 2011 to 2017. The data taken into consideration was monthly. Several variables taken into consideration are: Exports, Imports, Bullion Prices, Crude oil Prices, Foreign Exchange Rate, Index of Industrial Production (IIP), Call Money Market Prices, Foreign Institutional Investment, Domestic Institutional Investment, Consumer Price Index (CPI) etc. using statistical techniques like Correlation, Multiple Regression and Error Analysis.

4. Methodology Data Description The present study uses the time series data obtained from two main sources i.e. Bombay Stock Exchange official website and Handbook of Statistics on Indian Economy provided by Reserve Bank of India.. We limit to select thirteen (14) macro-economic variables. The selection of variables for the present study is based on the existing theoretical propositions and the empirical evidences. The base period for Sensex is 1978-79 = 100, whereas, the other index series are rebased as 2012 = 100. To accomplish the research objective monthly data ranging from Jan-2011 to August-2017 are obtained. The choice of study period is based on the availability of data series.

5. Statistical Method for Data Analysis The study employs MS Excel for data arrangement and sorting. Multiple regression technique in SPSS was used to study the relationship between the stock market index and the selected macroeconomic variables ( Y= A + B1V1+B2V2 + ……………………….. +B14V14) Y = BSE Sensex A = intercept of Y which is constant B = Beta coefficient V = Macro Economic Variables

6. Objectives •To explore the major macro-economic variables. •To investigate the impact of macroeconomic variables on Indian stock market performance. •To study the direction and degree of relationship between selected macroeconomic factors and stock returns. •To minimize the error occurring during the study.

7. Limitations The time period of the study is limited only for 6 years data (2011-12, 2012-13, 2013-14, 2014-15, 2015-16, and 2016-17). The variables taken into consideration are fourteen (14). Our study is limited to the index of BSE Sensex.

8. Macro Economic Variables

9. Index of Industrial Production (IIP) (V4) Crude oil Prices ( V5) Lending Rates (V6) Consumer Price Index (CPI) (V1) Foreign Exchange Rate (V10) Call Money Market (V9) Currency circulation(V14) Foreign Exchange Reserves (V11) Foreign Institutional Investment (FII) (V12) Domestic Institutional Investment(DII) (V13) Gold Prices (V2) Silver Prices (V3) Exports (V7) Imports(V8)

10. Conclusion Domestic Institutional Investment(DII) (V13), Foreign Exchange Rate (V10), Foreign Exchange Reserves (V11). These are the factor which are most significantly effecting the stock prices. Even emotions and market leaders effects the stock market. i.e according to the semi strong form of EMH : Any release of public information effects the stock prices. There also exists internal Information also affect the Stock Prices hence we cannot make a right forecast of the price moments

11. Thank you !!