Professional Documents
Culture Documents
On
Bangalore University
By
PREVEEN.NP.
Reg. No: 03XQCM6074
Under the Guidance and Supervision
Of
Dr.N.S.VISHWANATH
Acknowledgement
It is with great pleasure and gratitude that I acknowledge the contribution of
several individuals towards the successful completion of the project.
I would like to express my gratitude to Dr. N.S. Vishwanath, Project guide, for
his invaluable suggestion and encouragement, which are imperative for the completion of
this project.
Words cannot express the immense gratitude I have for my parents who have
been instrumental in shaping my career. I am thankful to all my friends and to all the
unseen hands that have made this project possible.
Preveen.N.P
DECLARTION
OF
SHARE
PRICES
WITH
RESPECT
TO
Place: Bangalore
PREVEEN N.P
Reg. No:03XQCM6074
Date: 17-06-2005
Contents
Introduction, Scope and Methodology of the Review Process
o
Introduction
Problem Statement
Theoretical Framework
Review of literature
o Research Methodology
11
Conceptual Definitions
13
15
17
26
43
54
Findings
56
Conclusion
57
In Conclusion
References
o
59
Bibliography
Abstract
This research is done in the field of Indian share markets taking into
account only three years data from Feb. 2002 to Feb 2005. The research includes
how the share prices of various selected companies vary w.r.t. to economic
factors. The research work includes the collection of data regarding the share
prices of the selected companies during the past three years and the SENSEX.
Simultaneously, I have searched through various Indian journals in our library,
located books listed in the library catalogue and traced through the list of
references provided in various research works. The main objective is to study how
share prices vary w.r.t economic factors and to enable the investors in exploring
the investment opportunities using the economic indicators.
Moreover, a large number of works are merely descriptive or prescriptive without
rigorous analysis. Certain areas such as arbitrage pricing theory, option pricing
theory, agency theory, and signaling theory are virtually unrehearsed in the Indian
context. Besides, very little theoretical work has been done by researchers in
India. However, with improved availability of databases and computing resources,
and with increasing global interest in Indian markets, we expect an explosion of
work in the near future.
INTRODUCTION
Macroeconomic Indicators and Stock Prices - Indian Evidence
This paper attempts to study the relationship of stock returns with
macroeconomic variables in Indian context. The data consists of 36 months
from feb2002 to feb2005 comprising of three macro indicators. We have
considered 3 macro variables for the study: Exchange Rate, inflation rate, FII.
Background:
It is widely believed that stock market is related to macroeconomic fundamentals
of an economy, as companies that are listed for trading in stock exchanges are the
ones who contribute significantly to the economy's growth. The notion that
macroeconomic factors can drive the movement of stock prices is now widely
accepted. However, it was only in the past decade or so that attempts have been
made to capture the effect of economic forces in a theoretical framework and
calibrate these effects empirically. According to standard stock valuation model,
the determinants of stock price are the expected cash flows from the stock and the
required rate of return. Chen, Roll and Ross (1986) showed that economic
variables have a systematic influence on stock return as a result of their effect on
future dividends and discount rate and they provided the foundation for the belief
in the existence of a long-term equilibrium relationship between stock price and
related macroeconomic variables. A central issue in macroeconomics is the
question of how financial markets are connected to the real side of the economy.
The issue has gained momentum due to increasing cross border movement of
funds as fund managers try to move to markets where possibility of higher returns
vis--vis risk is high. The ongoing integration of international capital markets and
the repeated occurrence of large financial crises have raised the concern about the
Problem Statement:
Volatile markets are characterized by wide price fluctuations and heavy trading
within a short span of time. Volatility is a traditional worry of investors, and is
associated with fast-growing stocks, high P/Es, smaller companies, Information
Technology (IT) firms. Volatility of stock market is usually caused by company
news, economic factors like changes in forex rates, inflation rates, interest rates
etc.
Share prices fluctuations affect the investors wealth creation. In this context, the
study of the impact of economic events on the movement of share prices in stock
market is undertaken.
Objectives of the study:
1.
2.
economic indicators
Hypothesis:
Null hypothesis (H0):
Economic factors do not affect the movement of share prices.
Alternate hypothesis (H1):
Economic factors affect the movement of share prices.
Theoretical Framework
Volatility: Definition and Measurement
In pure financial terms, volatility is defined as, 'the degree to which the price a
of
security, commodity, or market rises or falls within a short-term period. As is
evident from the definition, volatility relates to the variability in the price of a
security. In the context of the stock market, volatility of the market refers to the
volatility of the indices of the securities within the market. In India, for instance,
the Bombay Stock Exchange (BSE) SENSEX (a 30 scrip weighted index of
market capitalization) would be one of the relevant indices to look into for
examining stock market volatility. When examining the issue of stock market
volatility, it is relevant to measure percentage volatility of stock return. This
reflects the percentage change in the value of the amount invested in the stock
market. It reflects the change in the investor's wealth. Theorists use various
measures of volatility like standard deviation, variance, co-efficient of variation, to
measure volatility of stock market return.
Stock market volatility is often classified as historical (actual) volatility or implied
volatility. The most common measure of historical or actual stock market volatility
is the standard deviation. In simple terms, standard deviation measures the
deviation of the returns of equity from its mean return. It is a relative measure i.e.
standard deviation of stock returns in one period can be compared with standard
deviation of another period to understand which period has been more volatile.
Generally, rolling standard deviation is used to measure actual stock market
volatility. The other measurement of volatility is the conditional volatility
(or standard deviation) lag of a variable and the variance (standard deviation) of its
residuals in predicting the current value of the variable.
The less known, but important measure of volatility is 'implied volatility'. This
measure is the result of an important fact about derivatives: The price of the
derivative along with the price of the underlying security produces two
observations of the security's price. Arbitrageurs have used this fact to profit by
determining whether a security is improperly priced relative to its derivative
(Mullins, 2000).
Review of Literature
In an early study, Geske and Roll (1983) found the linkage between
macroeconomic variables and stock prices in US but found a negative relationship
between stock prices and inflation. Chen, Roll and Ross (1986) found that
economic variables like industrial production index, change in risk premium and
inflation have a systematic influence on stock return and showed the existence of a
long run equilibrium relationship. However, they also found that oil prices and
consumption did not have significant effect on stock prices. In another study,
Mukherjee and Naka (1995) found that Jam\pese stock prices are linked to money
supply, inflation, real economic activity, long-term government bond rate,
exchange rate and interest rate. In another study, Naka, Mukherjee and Tufte
(1999) found that in Indian market, industrial production is the largest determinant
of stock prices while inflation is the largest negative determinant. Lee (1992)
showed a positive Ii relationship between stock returns and the real economy in
US. Gjerde and Saettem , (1999) showed that the stock returns respond negatively
to the change in the interest rate in Norway and found a positive relationship of
stock returns with oil prices and real economic activity. Asian markets have been
studied by Fung and Lie (1990), Leigh (1997), Granger, Huang and Yang (1998),
Kwon and Shin (1999), Maysami and Koh(2000). In a study by Nath and Samanta,
(2003a), it was found that the stock market and the exchange rate were not
generally co integrated in India and some amount of causal effect could be noticed
only late in 1990s. In another study, Nath and Samanta (2003b) examined the
changing pattern in extent of integration between foreign exchange and capital
markets in India using daily data and found that in V AR-framework empirical
results do not point much impressive causal relationship between returns except in
some specific years. However, they found using Geweke's feedback measures
strong bi-directional as well as contemporaneous causal relationship between these
markets.
From the existing literature, the linkage between macroeconomic variables and
stock prices have been established for major markets like US, Japan while for
other markets the same cannot be said for certainty.
for the economy given recent news of continuing American deaths in the ongoing
crisis in Iraq
Paper 2: The Impact of the Stock Market on the Economy This paper looks at the effect; the stock market has on the U.S. economy. It looks
at the effects of a declining stock market and a rising stock market. Also discussed
are to what extent the economy effects the stock market and how much the two are
intertwined. The paper also includes opinions and analyses from different experts
in economics, which help explain the relationship between the stock market and
the economy.
From the Paper:
Recent declines in the stock market have had a detrimental impact the economy
both in the United States and abroad. The stock market and the economy are
deeply intertwined. As such, stock market declines have a wide-ranging effect
on many sectors of the economy. Importantly, the health of the stock market is
seen as an indicator of the general economic health. Thus, any decline in the
stock market is often seen as a negative prediction for the economy. Drops in
the stock market often translate into decreased net worth for both households
and businesses, and thereby decrease consumer spending and confidence,
resulting damage to the economy."
Research Methodology:
Secondary Data:
Data collected was of BSE-SENSEX for the period From Feb 2002 to Feb.
2005 .
2.
Only three years1st March 2002 to 28th Feb 2005 data will be taken
4.
Due to time & resource constraints only four economic factors like
Government policies, Interest rates, Inflation rate and foreign
Exchange rates will be considered.
Operational Definitions:
1) Wealth management:
Wealth management can be defined as a professional service, which is the
combination of financial/investment advice, accounting/tax services, and
legal/estate planning for a fee. In general, wealth management is more than just
investment advice as it can encompass all parts of a person's financial life.
The main function of wealth management includes maximizing the
Return on Investment (ROI) involved in various investments with minimum risks
to the investor.
2) High P/E:
P/E can be defined as a valuation ratio of a company's current share price
compared to its per-share earnings.
Calculated as:
P/E shows how much investors are willing to pay per rupee of earnings.
In general, a high P/E means high projected earnings in the future.
However, the P/E ratio actually doesn't tell us a whole lot by itself. It's usually
only useful to compare the P/E ratios of companies in the same industry, or to the
market in general, or against the company's own historical P/E.
3) Owners wealth:
Owners wealth can be defined as the product of number of shares held by an
investor to the market price of the share.
An investment in the equity of any company is likely to be most profitable if the
economy is strong and prosperous. So, the expectation of the growth of the
economy is favorable for the stock market. The growth of the national economy
can be used to forecast the growth of an industry or company and thus to
determine those areas offering good opportunities. This process will also help to
point out industries and companies that should be avoided because they appear to
offer less attractive opportunities. As a principle, a strong and stable economy with
real growth is favorable for investment.
Sensex movement
8,000.00
7,000.00
6,000.00
5,000.00
4,000.00
Close
3,000.00
2,000.00
1,000.00
Fe
b0
M 2
ay
-0
Au 2
g0
No 2
v-0
Fe 2
b0
M 3
ay
-0
Au 3
g0
No 3
v-0
Fe 3
b0
M 4
ay
Au 04
g0
No 4
v-0
Fe 4
b05
0.00
month/year
The above graph shows the movement of SENSEX from February 2002 to
February 2005.As shown in the graph SENSEX has moved from 3562.31 in
February 2002 to 6713.86 in February 2005.
Improvement
Transparency
Simplicity
QualificationCriteria:
The general guidelines for selection of constituent scrips in SENSEX are as
follows
A. Quantitative Criteria:
1. Final Rank: The scrip should figure in the top 100 companies listed by Final
Rank. The final rank is arrived at by assigning 75% weight age to the rank on
the basis of six-month average full market capitalization and 25% weight age
to the liquidity rank based on six-month average daily turnover & six-month
average impact cost.
2. Trading Frequency: The scrip should have been traded on each and every
trading day for the last six months. Exceptions can be made for extreme
reasons like scrip suspension etc.
3. Market Capitalization Weightage: The weight of each scrip in SENSEX
based on six-month average Free-Float market capitalization should be at least
0.5% of the Index.
4. Industry Representation: Scrip selection would take into account a balanced
representation of the listed companies in the universe of BSE. The index
companies should be leaders in their industry group.
B. Qualitative Criteria:
Track Record:
In the opinion of the Committee, the company should have an acceptable track
record
Index Review Frequency:
The Index Committee meets every quarter to review all BSE indices. However,
every review meeting need not necessarily result in a change in the index
constituents. In case of a revision in the Index constituents, the announcement of
the incoming and outgoing scrips is made six weeks in advance of the actual
implementation of the revision of the Index.
While selecting scrip from SENSEX, only those scrips were taken for study,
which was there in SENSEX on Feb 2005, and also from the day they are included
in SENSEX from March 2002. (All the co-efficient have been calculated)
FII Inflows to India: Their Effect on Stock Market Liquidity and Volatility
Stock markets in India were opened to foreign capital flows in 1992, with its
ramifications
(both
positive
and
negative).
market. Such shift in investor preference can be damaging in cases where the stock
market boom is led by capital inflows. Sudden stops or reversals in these flows
can leave the economy devoid of funds to sustain growth and development. This
has found to be true in Mexico and Argentina (Levine, 1997).
Given this fact, the consequences of such inflows on the stock market become an
important aspect of any study of capital inflows to a country. These papers briefly
examine the consequences and study two of these consequences viz., liquidity and
volatility in some depth in the case of India. This paper is divided into two
sections. Section 1 evaluates the impact of capital inflows on stock market
liquidity and Section 2 examines the impact on stock market volatility.
Therefore from the above, we can interpret those changes in FIIs affects
the Bajaj Autos share price considerably.
4) Bharti Tele Share price:
Correlation coefficient (r) = 0.868579
From the above table, while comparing the changes in the FIIs with the
changes in the Bharti Tele Share price, we get a correlation of 0.868579.
r2 = 0.75443, Now r2 * 100 = 75.443%.
Therefore from the above, we can interpret that changes in FIIs affects the
Bharti Tele share price positively.
From the above table, while comparing the changes in the FIIs with the
changes in the Dr Reddys Share price, we get a correlation of 0.973186.
r2 = 0.9471, Now r2 * 100 = 94.71% .
Therefore from the above, we can interpret that change in FIIs affects the
Dr Reddys share price i, e..Positively correlated.
8) Grasim Share price:
Correlation coefficient (r) = 0.713656
From the above table, while comparing the changes in the FIIs with the
changes in the Grasim Share price, we get a correlation of 0.713656.
r2 = 0.5093, Now r2 * 100 = 50.93%.
Therefore from the above, we can interpret that the change in FIIs affects
the Grasims share price not very much.
9) GACL Share price:
Correlation coefficient (r) = 0.999976
From the above table, while comparing the changes in the FIIs with the
changes in the Hindalcos Share price, we get a correlation of 0.999976.
r2 = 0.999952, Now r2 * 100 = 99.9952%.
Both have a perfect correlation.
10) HLL Share price:
Correlation coefficient (r) = 0.997634
From the above table, while comparing the changes in the FIIs with the
changes in the HLLs Share price, we get a cor relation of 0.997634.
r2 = 0.99523, Now r2 * 100 = 99.523%.
Both have a perfect correlation
100 = 99.86%.
Perfect correlation
19) TATA Motors Share price:
Correlation coefficient (r) = 0.348353
From the above table, while comparing the changes in the FIIs with the
changes in the TATA Motors Share price, we get a correlation of 0.348353.
r2 = 0.12135, Now r2 * 100 = 12.135%.
M P Birla Institute of Management
Inflation
This was written for Business India, and was carried in its July 19, 2004 issue
with the same title.
As someone once said with a dash of humor, `Inflation is when you pay fifteen
dollars for the ten dollar haircut you used to get for five dollars when you had
hair.' But the de inflation makes in your investments is far from humorous. In
nt
fact over the long-term the `damage' is significant enough to make the most
unflappable investor sit up and take notice. First, let's understand inflation a little
better. Simply speaking, an inflationary situation is where there is `too much
money chasing too few goods'. As products/services are scarce in relation to the
money available in the hands of buyers, prices of the products/services rise to
adjust for the larger quantum of money chasing them.
Let's understand this with the help of an example. Let's assume Rs 500 fetches you
1 gram of gold. Suppose there is a shortfall in the global supply of gold. The
obvious implication is that gold prices will rise to adjust for the sustained demand
at lower supply. This may sound complicated but it's a thumb rule of demand
supply - high demand combined with limited supply leads to higher prices. Let's
say gold prices rise by 10%. The revised rate of 1 gram of gold will be Rs 550.
However, in real terms (i.e. in terms of the commodity in question) the value of
the rupee would have declined from 1 gram of gold for Rs 500 to only 0.91 gram
of gold for Rs 500. So the value of the rupee has eroded. In other words, the same
quantum has money now fetches you fewer goods. Now you know why that
haircut does not cost the same as it did even 2 years ago!
principal amount. For e.g. say the bond is issued at Rs 100 on June 1, 2004
with a fixed coupon of 3.00%. Six months henceforth when the first interest
payment is due, the principal amount will be recalculated based on the
existing inflation levels. The same CIB worth Rs 100 bond could now be
worth Rs 110 on account of the rising prices, the coupon rate will be
applied to this revised sum and interest payments made accordingly.
This is pretty much what the risk-averse investor has on his plate in inflationary
times. On the other hand, the risk-taking investor has one more option to counter
inflation - equities.
Equities
It's no secret that no asset class evokes as much excitement as stocks/equities.
However, in our view this excitement is often misplaced. Stocks stimulate
unbridled enthusiasm and fervor for the wrong reasons. Investors take to stocks
because of their ability to clock exponential growth over a shorter time frame. For
the serious, risk-taking investor stocks have a higher appeal - their ability to
effectively counter inflation and give superior real returns over the long-term vis-vis any other asset class. This is a fact attested to by several studies.
Busting inflation
(Growth indicates avg. growth rate over a 15-Yr time frame. Graph sourced
from HDFC Mutual Fund)
The yawning void between inflation and investment in equities is evident from the
above graph. Equally evident is the narrow gap between inflation and peer asset
classes - fixed deposits and gold.
However, stocks carry significant risk, especially if one is attempting to build
his/her own portfolio of stocks. For those who wish to minimize this risk,
diversified equity funds are an option.
In addition to the asset classes we have outlined, there are some other
unconventional, but effective, investment avenues to outpace inflation.
Commodities
The key factors that determine the price of a commodity like gold for example
(mine output for one) are different from factors that impact the value of other
Effect of Inflation:
high-low Monthly inflaton
9
8
inflation in %
7
6
5
High
Low
3
2
1
march
April
may
june
july
august
september
october
november
december
January
February
March
April
May
June
July
August
September
October
November
December
January
February
March
April
May
June
July
August
September
October
November
December
January
February
2002
2003
2004
2005
Month/year
Therefore we can interpret that changes in inflation rate have only 0.392%
effect on the BSE SENSEX values, which is quite minute.
2) ACC Share price:
Correlation coefficient (r) = -0.00021
From the above table, while comparing the changes in the inflation rate
with the changes in the ACCs Share price, we get a correlation of 0.00021.
r2 = 0.000000044, Now r2 * 100 = 0.0000044%.
Therefore we can interpret that changes in inflation rate have only
0.0000044% effect on the ACCs Share price , which is quite minute.
3) Bajaj Auto Share price:
Correlation coefficient (r) = 0.08365
From the above table, while comparing the changes in the inflation rate
with the changes in the Bajaj Autos Share price get a correlation of
0.08365.
r2 = 0.00699, Now r2 * 100 = 0.699% .
Therefore we can interpret that changes in inflation rate have only 0.699%
effect on the Bajaj Autos Share price , which is quite minute.
Therefore we can interpret that changes in inflation rate have only 0.449%
effect on the Infosys Technologies Share price, which is quite minute.
17) ITC Share price:
Correlation coefficient (r) = -0.11398
From the above table, while comparing the changes in the inflation rate
with the changes in the ITCs Share price, we get a correlation of -0.11398.
r2 = 0.01299, Now r2 * 100 = 1.299% .
Therefore from the above, we can interpret those changes in inflation rate
affects the ICICI Banks Share price value by 1.412%. To illustrate, if
inflation increases, then the ICICI Banks Share price would decrease by
1.412%.
18) L&T Share price:
Correlation coefficient (r) = 0.189582
From the above table, while comparing the changes in the inflation rate
with the changes in the L&T Share price, we get a correlation of 0.189582.
r2 = 0.03594, Now r2 * 100 = 3.594% .
Therefore from the above, we can interpret that changes in inflation rate
affects the L&T Share price value by 3.594%. To illustrate, if inflation
increases, then the L&T Share price would increase by 3.594%.
19) Maruti Udyog Share price:
Correlation coefficient (r) = 0.048375
From the above table, while comparing the changes in the inflation rate
with the changes in the MarutiUdyog Share price, we get a correlation of
0.048375.
r2 = 0.00234, Now r2 * 100 = 0.234% .
Therefore we can interpret that changes in inflation rate have only 0.234%
effect on the MarutiUdyog Share price, which is quite minute.
M P Birla Institute of Management
re/$
46
high
45
low
44
43
42
41
M
A
M
J
J
A
S
O
N
D
J
F
M
A
M
J
J
A
S
O
N
D
J
F
M
A
M
J
J
A
S
O
N
D
J
F
40
2003
2004
2005
month/year
The above graph shows the movement of Re-$ from March 2002 to
February 2005. Re has strengthened from 49.06 in March 2002 to 43.4 in February
2005.
Negligible correlation.
4) Bharti Tele Share Price:
M P Birla Institute of Management
Therefore from the above, we can interpret those changes in Re-$ exchange
rate affects the HDFC Ltd Share price value by 4.22 %. To illustrate, if the
Re strengthens against the dollar, then the HDFC Ltd Share price would
decrease by 4.22 %.
From the above table, While comparing the changes in the Re-$ exchange
rate with the changes in the HLLs Share price, we get a correlation of
0.017593.
r2 = 0.00031, Now r2 * 100 = 0.031 % .
Therefore we can interpret those changes in Re-$ exchange rate has only
0.031 % effect on the HLLs Share price , which is quite minute.
if the Re strengthens against the dollar, then the L&T Share price would
increase by 14.068%
Therefore we can interpret those changes in Re-$ exchange rate have only
0.38% effect on the Ranbaxy Share price, which is quite minute.
21) REL Share price:
Correlation coefficient (r) = -0.36477
From the above table, while comparing the changes in the Re-$ exchange
rate with the changes in the REL Share price, we get a correlation of 0.36477.
r2 = 0.1331, Now r2 * 100 = 13.31 % .
Therefore from the above, we can interpret those changes in Re-$ exchange
rate affects the REL Share price value by 13.31 %.
22) RIL Share price:
Correlation coefficient (r) = 0.186572
From the above table, While comparing the changes in the Re-$ exchange
rate with the changes in the RIL Share price, we get a correlation of
0.186572.
r2 = 0.0235, Now r2 * 100 = 2.35% .
Therefore from the above, we can interpret those changes in Re-$ exchange
rate affects the RIL Share price value by 2.35%.
23) Satyam Share price:
Correlation coefficient (r) = -0.18013
From the above table, While comparing the changes in the Re-$ exchange
rate with the changes in the Satyam Share price, we get a correlation of 0.18013.
r2 = 0.03245, Now r2 * 100 = 3.245% .
Therefore from the above, we can interpret those changes in Re-$ exchange
rate affects the Satyams Share price value by 3.245%.
M P Birla Institute of Management
From the above table, While comparing the changes in the Re-$ exchange
rate with the changes in the ZEE TeleFilm Share price, we get a correlation
of -0.3436.
r2 = 0.1181, Now r2 * 100 = 11.81% .
Therefore from the above, we can interpret that changes in Re-$ exchange
rate affects the ZEE TeleFilm Share price value by 11.81%. To illustrate, if
the Re strengthens against the dollar, then the ZEE TeleFilm Share price
would decrease by 11.81%.
Hypothesis Testing
1) Financial Institutional Investors
Model
R square
Adjusted
square
.980
.960
Standard error
of estimate
.921
2.09910336
Standardized
Coefficients
Std.error
(Constant)
7.099
1.218
% change
4.449E-02
.009
significance
Beta
5.829
.980
.108
4.924
.128
Result: t- is significant in case of FII. They affect the share prices positively.
2) Inflation
Predictors: (Constant), % change
Model
R square
Adjusted
square
.063
.004
-.041
Standard error
of estimate
3.62882
Standardized
Coefficients
Std.error
(Constant)
-9.910E-02
.744
% change
3.843E-02
.131
significance
Beta
-.133
.063
.895
.294
.771
3) Exchange rate
Model
R square
Adjusted
square
.002
.000
-.045
Standard error
of estimate
1.03620
Standardized
Coefficients
Std.error
(Constant)
-0343
.213
% change
2.735E-03
.369
significance
Beta
-1.608
.002
.122
.007
.994
Results: In the above two cases they are insignificant and have negligible
influence on share prices
FINDINGS:
1) Effect of changes of Rupee-$ exchange rate on BSE SENSEX value is very
minute. So we can say that Rupee-$ Exchange rate hardly effects SENSEX.
It is interesting that few scrips of SENSEX like ACC, BAJAJ, GRASIM,
INFOSYS, L&T, ONGC, REL, TATA Power, and ZEE Tele Films are affected
positively or negatively more than 10% of Correlation of Determination (R2).
Affect on other Scrips is Negligible. Even Hypothesis calculated in this purpose
explains that rupee -$ exchange rates dont affect BSE SENSEX
2) Effect of changes of Inflation rate on BSE SENSEX value is very minute. So
we can say that Inflation rate hardly affects SENSEX.
It is interesting that only scrip of SENSEX that is BHARATI TELE is
affected more than 10% of Correlation of Determination (R2). Affect on other
Scrips is Negligible.
3) Effect of changes of FII Flow in share market and its influence on BSE
SENSEX value is very affective. Its affects on almost all scrips of SENSEX are
very high.
4)The internal domestic economy is stable and consistent.
5) Incase of foreign exchange markets, they are relatively consistent and do not
make much impact on Indian stock market.
6) Since the rupee is relatively cheaper there is no organic link between India
stock market and stock market elsewhere.
BIBLIOGRAPHY
1) ICFAI journal of Applied Finance
Articlesa) Macroeconomic Indicators and Stock Prices - Indian Evidence
-Golaka C Nath and Dr. Y V Reddy
b) FII Inflows to India: Their Effect on Stock Market Liquidity and
Volatility
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