Impact of Macroeconomic Variables on Stock Market in India

Stock market returns depend on the changes in the stock market index. In India, S&P BSE Sensex is considered as the pulse of the stock market. S&P BSE Sensex is the sensitive index of Bombay Stock Exchange (BSE), which is a value- weighted index, composed of 30 largest and most actively traded stocks. There have been limited studies on the linkage between the macro economy and stock prices in India. The purpose of this study is to investigate this linkage between macroeconomic variables and stock market returns with reference to S&P BSE Sensex as well as the linkage between macroeconomic variables and S&P BSE sectoral indices. The study also investigates the linkage between exchange rate and volatility of S&P BSE Sensex Returns.