Impact of Selected Macro-economic Factors on NIFTY Returns

Abstract

the systematic risk that is the market risk which cannot be eliminated and it thus remains the major Stock market return is one of the most crucial factors in component influencing the volatility. The market the stock market which is influenced by many factors.risk is influenced by various macroeconomic The volatility in the market return can lead to severe losses even if the portfolio is diversified. Thus it is very factors like the Exchange Rate, Index of Industrial important to track and determine the trend of the Production, GDP growth rate, Interest Rate, macroeconomic factors on the stock market return.This Inflation Rate and many more. investigation takes into account various factors like The investigation of this research revolves on Inflation Rate, Interest Rate, GDP Growth Rate, studying the impact of the above mentioned Exchange Rate, and Index of Industrial Production. factors on NIFTY. The research is mainly done in These variables are analysed along with the movement two phases; the first phase includes the check on of Nifty. The data is taken from December 2008the stationarity of the variables both dependent December 2018 and is taken in yearly format. The study and independent. This is done because before uses two techniques, the Augmented Dickey Fuller test doing any multiple regressions it becomes (ADF Test) and Multiple Regression Test. Multiple mandatory to check the stationarity of the data. regression tests conducted in this project showed that The dependent variable is NIFTY while the GDP and Exchange Rate are having negative impact on explanatory variables are Exchange Rate, Index of the stock market which indicated that, with the Industrial Production, GDP growth rate, Interest appreciation of the USD and depreciation of the IndianRate and Inflation Rate. In order to check the currency the perception of the investor towards stock stationarity of data the Augmented Dickey Fuller market is negative. However, the GDP when tested (ADF) test is preferred. individually showed a positive relation with Nifty. ThisThe second phase mainly checks the significance showed that all the variables are lined to each other and of these factors on NIFTY and also the relationship the movement is not caused by a single variable. However, IIP has showed a positive impact on between them, i.e. whether the relation is positive movement of Nifty.or negative. To check this multiple regression technique is been used. From the multiple Key Words:regression tests it has been found that except the Volatility, Macroeconomic Factors, Augmented inflation rate all the other independent factors Dickey Fuller Test, Multiple Regression have a positive or negative impact on NIFTY.