Impact of macroeconomic indicators on Indian capital markets
Karam Pal and
Journal of Risk Finance, 2011, vol. 12, issue 2, 84-97
Purpose - The purpose of this paper is to examine the long-run relationship between the Indian capital markets and key macroeconomic variables such as interest rates, inflation rate, exchange rates and gross domestic savings (GDS) of Indian economy. Design/methodology/approach - Quarterly time series data spanning the period from January 1995 to December 2008 has been used. The unit root test, the co-integration test and error correction mechanism (ECM) have been applied to derive the long run and short-term statistical dynamics. Findings - The findings of the study establish that there is co-integration between macroeconomic variables and Indian stock indices which is indicative of a long-run relationship. The ECM shows that the rate of inflation has a significant impact on both the BSE Sensex and the S&P CNX Nifty. Interest rates on the other hand, have a significant impact on S&P CNX Nifty only. However, in case of foreign exchange rate, significant impact is seen only on BSE Sensex. The changing GDS is observed as insignificantly associated with both the BSE Sensex and the S&P CNX Nifty. The paper, on the whole, conclusively establishes that the capital markets indices are dependent on macroeconomic variables even though the same may not be statistically significant in all the cases. Originality/value - This study emphasises on the impact of macroeconomic variables on the stock market performance of a developing economy, whose performance is measured by these variables.
Keywords: India; Capital markets; Macroeconomics; Stock markets; Time series analysis (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (17) Track citations by RSS feed
Downloads: (external link)
http://www.emeraldinsight.com/10.1108/152659411111 ... RePEc&WT.mc_id=RePEc (text/html)
Access to full text is restricted to subscribers
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eme:jrfpps:v:12:y:2011:i:2:p:84-97
Ordering information: This journal article can be ordered from
Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
http://emeraldgroupp ... /journals.htm?id=jrf
Access Statistics for this article
Journal of Risk Finance is currently edited by Bonnie Buchanan
More articles in Journal of Risk Finance from Emerald Group Publishing
Bibliographic data for series maintained by Virginia Chapman ().