Stock Indices and Inflation Through Industry Prisms

Abha Mohan (), Tomy Mathew () and K. Subramanian ()
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Abha Mohan: ChinmayaVishwavidyapeeth
Tomy Mathew: CMS College (Autonomous)
K. Subramanian: ChinmayaVishwavidyapeeth

Chapter Chapter 4 in Current Issues in the Economy and Finance of India, 2018, pp 55-67 from Springer

Abstract: Abstract The relationship between macroeconomic variablesMacroeconomic variables and stock priceStock price is a widely discussed and investigated topic both in developed and developing countries. But, so far industryIndustry specific studies are limited in Indian context. Among various macroeconomic variablesMacroeconomic variables , rate of inflationInflation is considered to be a prominent economic indicator. The current study examined the long run association between IndustryIndustry specific indices and inflationInflation rate. InflationInflation rate measured in terms of CPI and four major sector indices of Bombay Stock Exchange such as S&P BSE Fast Moving Consumer Goods, S&P BSE Healthcare, S&P BSE Information Technology and S&P BSE Bankex were taken for industryIndustry specific analysis. In view of the fact that CPI numbers are measured monthly, the study used monthly data of inflationInflation rate and BSE Sectoral IndicesBSE Sectoral indices from January 2012 to October 2017. Econometric techniques such as Augmented Dickey Fuller test, Johansen Co-integrationCo-Integration test, VECM and VAR models were applied to the time series data. The results established negative long run causalityCausality running from inflationInflation rate towards FMCG and Banking indices, but no relationship was established with Pharmaceutical and IT indices.

Keywords: Inflation; Stock price; Industry; Consumer price index; BSE sectoral indices (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-319-99555-7_4

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DOI: 10.1007/978-3-319-99555-7_4

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