Effect of Macroeconomic Variables on Stock Market
The paper aims to study the effect of macroeconomic factors on the performance of the Indian Stock market Index (BSE: 500) using monthly and yearly data over the time frame of June 2003 to June 2016. The macroeconomic variables are; Inflation, exchange rate, Oil Prices, Gold Prices, Aggregated monsoon. The study also found the correlation between different macroeconomic variables using which they were fitted in the VAR regression model. The long term relation of the Indian stock market was studied with these macroeconomic parameters. The paper also looks at which variables are more significantly related to the Stock market in the long run the domestic macroeconomic variables or global. One of the most significant macroeconomic factor is Gold. Gold prices have an inverse relationship with the price of the dollar. Given the importance of Gold in the global economy, we have analyzed the close co relation between the gold prices and the stock market prices and the factors that have created such relations between gold and stock market.