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The Macro Lens: Exploring the Impact of Macroeconomic Variables on India’s Small Cap, Mid Cap, and Large Cap Indices

Author

Listed:
  • Pachiyappan Sathish

    (Christ University, School of Business and Management, India)

  • Sardana Dhruv

    (Christ University, School of Business and Management, India)

  • Joshi Unnati

    (Christ University, School of Business and Management, India)

  • Rajesh Gautam

    (Christ University, School of Business and Management, India)

  • Pallickal Abel Thomas

    (Christ University, School of Business and Management, India)

  • Chellasamy Aarthy

    (Christ University, School of Business and Management, India)

  • Nagarathinam Aishwarya

    (Christ University, School of Business and Management, India)

  • Joshuva Selvakumar J

    (Christ University, School of Business and Management, India)

Abstract

Subject and Purpose of Work This study explores the intricate relationship between key macroeconomic variables and India’s equity market segments, specifically the NIFTY Small-cap, Mid-cap, and Large-cap indices. The primary objective is to evaluate how selected macroeconomic factors influence market dynamics and investor sentiment in the Indian context. Materials and Methods The research analyses monthly data spanning five years, from January 2019 to January 2024. The macroeconomic indicators considered include Foreign Institutional Investment (FII), Domestic Institutional Investment (DII), Consumer Price Index (CPI), Purchasing Managers’ Index (PMI), Treasury Bill Rate, Gold Price, and Reverse Repo Rate. Statistical techniques such as the Unit Root Test, Ordinary Least Squares (OLS), and Granger Causality Test are employed to assess the short-term and long-term impacts of these variables on market indices. Results The findings reveal that GDP, CPI, PMI, and Gold Price exhibit no statistically significant influence on the NIFTY Small-cap, Mid-cap, or Large-cap indices, aligning with certain earlier studies. However, variables like FII, DII, Treasury Bill Rate, and Reverse Repo Rate show varying degrees of influence across the indices, highlighting the complex and segmented nature of the Indian equity market. Conclusion These insights are valuable for investors, policymakers, and financial analysts in refining investment strategies, informing policy frameworks, and enhancing market forecasting models. The study underscores the need for continuous evaluation of macroeconomic influences to better navigate market volatility and investor behaviour.

Suggested Citation

  • Pachiyappan Sathish & Sardana Dhruv & Joshi Unnati & Rajesh Gautam & Pallickal Abel Thomas & Chellasamy Aarthy & Nagarathinam Aishwarya & Joshuva Selvakumar J, 2025. "The Macro Lens: Exploring the Impact of Macroeconomic Variables on India’s Small Cap, Mid Cap, and Large Cap Indices," Economic and Regional Studies / Studia Ekonomiczne i Regionalne, Sciendo, vol. 18(3), pages 376-388.
    • Handle: RePEc:vrs:ecoreg:v:18:y:2025:i:3:p:376-388:n:1007
    DOI: 10.2478/ers-2025-0027
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    References listed on IDEAS

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    4. Karam Pal & Ruhee Mittal, 2011. "Impact of macroeconomic indicators on Indian capital markets," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 12(2), pages 84-97, March.
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