ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Are Macroeconomic Indicators Accountable for Sectoral Stock Price Behaviours?

Capital market stability is a crucial ingredient for the smooth functioning of a developing economy. This paper attempts to identify the significant macroeconomic factors affecting prominent sectoral stock indices and helps investors draw up an effective diversification strategy.

Nowadays, stock exchanges have become an important institution for the smooth functioning of any developing economy. The stability of capital market is directly linked to growth indicators of major economies (Titan 2015). A stock market is a secondary marketplace where the securities are purchased and sold by the existing investors and it is a place where businesses issue the shares for the purpose of raising long-term funds for implementing their strategically accepted plans. The main two stock exchanges of India are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The company stocks can get affected by the different macroeconomic variables.

The strength of stock markets is one of the hallmarks and facilitators of entrepreneurial progress, which in turn will also infuse sufficient liquidity into the consumer market (Dragota et al 2009). The aim of this paper is to propose a model for investors and to identify the significant factors affecting some of the prominent Indian stock indices. These stock indices represent industry-wise variations in the value of shares listed in the stock markets, that is, the BSE and NSE. This study will help new and existing investors to predict the stock market trends and adopt a diversification strategy during portfolio construction or revision process. The greater the predictability of a stock index, the lesser is the risk associated with investing in indexed or similar stocks and vice versa.

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Published On : 20th Jan, 2024

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