Abstract

The stock market is a key indicator of a country’s economic health, but it remains vulnerable to fluctuations in macroeconomic variables. Fluctuations in factors like inflation, interest rates, exchange rates, and GDP growth can significantly influence stock prices, market stability, and investor confidence. These macroeconomic shifts create challenges for individual and institutional investors, who may find it difficult to predict market movements. Investors must navigate these complexities by understanding how macroeconomic factors impact stock market performance. This study investigated the effect of macroeconomic variables on the performance of the Indian Stock Market to test whether a change in macroeconomic variables leads to a change in the stock market. For the study, ten macroeconomic variables are chosen, namely Inflation rate, Exchange rate, Gold Price, Silver Price, Foreign exchange reserve, Bank Rate, Consumer price index, Wholesale price index, Index of Industrial Production, and Trade balance. This study uses the monthly data for 10 years, starting from 2014 to 2024. The data is analyzed by using statistical techniques such as the augmented Dickey-Fuller (ADF) test, Phillips-Perron (PP) test, Kwiatkowski- Phillips-Schmidt-Shin (KPSS) test, Multivariate correlation, Regression Analysis, Granger causality test, and Neural network approach. For the study, Nifty 50 is taken as the dependent variable, and all macroeconomic factors are independent variables. The study reveals a significant relationship between the selected macroeconomic factors and the Indian stock market, specifically Nifty 50.

Authors

Gopi Selvapandian, Balamurugan Gunabalan, G. Raja Shyamala
Mepco Schlenk Engineering College, India

Keywords

Nifty 50, Macroeconomic Factors, Augmented Dickey Fuller Test, Granger Causality Test, Neural Network