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The Impact Of Macroeconomic Indicators On Indian Stock Prices: An Empirical Analysis

Author Info

Listed author(s):
  • GIRI A. K.

    (Department of Economics and Finance, Birla Institute of Technology and Science (BITS), India)

  • JOSHI Pooja

    (Department of Economics and Finance, Birla Institute of Technology and Science (BITS), India)

Registered author(s):

    Abstract

    The purpose of the present study is to examine the long run and the short run relationship between stock price and a set of macroeconomic variables for Indian economy using annual data from 1979 to 2014. The long run relationship is examined by implementing the ARDL bounds testing approach to co-integration. VECM method is used to test the short and long run causality and variance decomposition is used to predict long run exogenous shocks of the variables. The results confirm a long run relationship among the variables. Evidence suggests that Economic growth, inflation and exchange rate influence stock prices positively. However, crude oil price influences the stock price negatively. This implies that the increase in oil price induces inflationary expectation in the mind of investors and hence stock prices are adversely affected. The VECM result indicates that short run and long run unidirectional causality running from economic growth and FDI to stock prices in India. The result of the variance decomposition shows that stock market development in India is mostly explained by its own shocks. The Government can take steps to control the crude oil price in India and Investors’ confidence has to be gained by boosting the economic growth of the economy through appropriate policy tools.

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    File URL: http://eccsf.ulbsibiu.ro/RePEc/blg/journl/12105giri&joshi.pdf
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    Article provided by Lucian Blaga University of Sibiu, Faculty of Economic Sciences in its journal Studies in Business and Economics.

    Volume (Year): 12 (2017)
    Issue (Month): 1 (April)
    Pages: 61-78

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    Handle: RePEc:blg:journl:v:12:y:2017:i:1:p:61-78
    Contact details of provider: Postal:
    Lucian Blaga University of Sibiu, Faculty of Economic Sciences Dumbravii Avenue, No 17, postal code 550324, Sibiu, Romania

    Phone: 004 0269 210375
    Fax: 004 0269 210375
    Web page: http://economice.ulbsibiu.ro/
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    Keywords: BSE index; Economic Growth; crude oil price; ARDL; VECM;

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