Impact Of Macroeconomic Variables On The Indian Stock Market: An Empirical Study

Abstract

This study explores the impact of macroeconomic variables on the Indian stock market, specifically the National Stock Exchange (NSE) Nifty 50 index. Five macroeconomic variables - exchange rate, gold price, inflation, interest rate, and Nifty 50 - are analyzed for five years (2018-2022). The research employs various statistical techniques including descriptive statistics, the Augmented Dickey-Fuller (ADF) test for stationarity, correlation analysis, and the Granger causality test to investigate the relationships and causalities among the variables. Findings indicate that while some variables exhibit normal distributions and stationarity, others show skewness and non-stationarity. Correlation analysis reveals significant relationships between Nifty 50 and certain macroeconomic factors. Overall, the study contributes to understanding the dynamics between macroeconomic indicators and stock market performance in India.The study reveals a significant relationship between selected macroeconomic variables and the Indian stock market, specifically the Nifty 50. Gold price, interest rate, and Nifty 50 show normal distributions, suggesting a stable pattern. The Granger Causality test shows bidirectional causality between Nifty 50 and the inflation rate, but no causality between the exchange rate, gold price, and interest rate.