The Influence of Macroeconomic Variables on the Stock Market Performance

Abstract

The purpose of the study is to empirically analyze the influence of the macroeconomic indicators on India’s stock market performance. The macroeconomic variables considered are inflation, interest rate, money supply, industrial production, and
exchange rates in India. The study covers the period from April 2005 to April 2021. The ADF test has been employed to explore the stationarity of the variables, and the ARDL methodology has been administered to unearth the association between the macroeconomic variables and stock market return. The study found that industrial production, interest rate, and exchange rate have long term negative relationship with stock return. More specifically, the exchange rate has a significant impact on the stock market performance. At the same time, inflation exhibits a negative short-term relationship with the stock market return.
Though money supply has a positive relationship, the magnitude is insignificant.