Affiliations: Pillai Institute of Management Studies and Research, New Panvel, Navi Mumbai, Maharashtra, India | E-mail: [email protected]
Correspondence:
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Corresponding author: Pillai Institute of Management Studies and Research, New Panvel, Navi Mumbai, Maharashtra, India. E-mail: [email protected].
Abstract: Financial analytics has been highly crucial in forecasting possible future economic scenarios. The relationship between a country’s macroeconomic indicators and its stock market has been extensively studied in the literature. Stock prices should be used as leading indications of future economic activity if they accurately reflect the underlying fundamentals. On the contrary, if economic activity follows stock price movement, the outcomes should be the opposite, i.e., economic activity should lead stock price movement. The paper attempts to make use of financial descriptive analytics to explore the interconnection between prominent macroeconomic indicators and stock market activity post ten years of financial crisis 2008. The study’s range is constrained to explore the aforementioned interconnection for the period from September’ 2008 to August’ 2018. The following factors have been found to be related over the long term: GDP, Production Index, Inflation, Exchange Rate, Money Supply, Imports, Exports, FDI, and Stock Market Returns. Shockingly FII has not shown any cointegrating equation. Also causality was observed between stock market and economic indicators. Impulse Response Function (IRF) and Variance Decomposition (VDC) techniques of VAR model are applied to decompose or fractionalize the variability caused by macroeconomic indicators on the BSE Sensex returns which has given some interesting results.
Keywords: Stock market, financial analytics, macroeconomic data
