IMPACT OF MACROECONOMIC FACTORS ON STOCK

PRICES OF CONGLOMERATE INDUSTRIES ‘WITH

SPECIAL REFERENCE TO STOCKS TRADED IN NSE’

Synopsis submitted by,

19MCRMC007

III Semester

Under the guidance of,

Suresh C K

Department of Commerce – PG Studies

School of Commerce

JAIN (Deemed-to-be University)

Bengaluru

November 2020

1
 Table of Contents
Introduction................................................................................................................................3

Current Indian money market....................................................................................................3

Literature review........................................................................................................................4

Literature review Conti..............................................................................................................4

Problem statement, objectives and scope of the study...............................................................5

Problem statement..................................................................................................................5

Objectives...............................................................................................................................5

Scope of the study..................................................................................................................5

Research methodology...............................................................................................................5

Research methodology Conti.....................................................................................................5

Data Analysis.............................................................................................................................6

Findings......................................................................................................................................6

Conclusion..................................................................................................................................7

Reference list..............................................................................................................................8

2
Introduction

 In the economy of India, the macroeconomic variables can greatly impact the stock
and budgetary market.
 The stock market and its indicators can reflect the direction, potentiality and the
health of the economy as there is an interdependency between the real economic
activities and the asset price.
 They depend upon factors such as productivity, production rate, inflation, interest
rates and dividend yields.

While analysing the macroeconomic factors’ impact in stock prices, understanding the
capital market and stock market paly an essential role they further help in understanding
the changes in the economic structure of the country and in an emerging country like
India, it also reflects huge expectations of investors, especially for the conglomerate
industries who deals in NSE. The capital market mainly regulates all financial securities
such as loans and bonds whereas, the stock market is the public trading market.

Current Indian money market

 The Indian money market has gone through a lot of changes in recent times especially
due to the influence of oil-cost dive and Chinese economy depreciation.
 Money supply and inflation have a strong positive relationship with each other as
inflation and exchange rate influence the stock prices positively (Giri and Joshi,
2017).
 In that respect, conglomerate industries such as Reliance Industries Ltd., ITC Ltd.,
Larson & Turbo and Piramal Group also have to rely on the inflation rate and cash
supply can impact their stock prices as high inflation can lead to increment in the
expected rate of return, which further can lower their price of the share.

Apart from that, the current money market is highly influenced by the increasing rate of the
money supply as well as inflation since that can turn into the future profit for the
conglomerate industries. However, in recent times, the Indian economy is facing decay due to
the lowering rate of stock price and other money and security-related exchanges and the
market can only rely on the gold since its price is increasing in the market.

3
Literature review

 In “Relevance of macroeconomic factors for the Indian stock market” written by

Srivastava (2010), it has shown that the Indian macroeconomic factors help in
understanding the Industrial production, interest rate and wholesale price index that
additional have a greater impact in Indian Stock Market.
 In “Macroeconomy, stock market and oil prices” Filis (2010) shown that consumer
price index is highly influenced by the stock price and oil price in the country.
 Based on the journal “Determinants of stock prices: Empirical evidence from NSE
100 companies” of Tandon and Malhotra (2013), it was mentioned that stock prices
can be greatly influenced by the market price, dividend and book value.

While analysing the relevant journals, it cannot be denied that macroeconomic factors are
highly influential while determining the stock price and greatly impact the money supply
in the economy in a country.

Literature review Conti.

 From the journal “Aggregate economic variables and stock markets in India” by
Ahmed (2008), it can be seen that there are multiple variables that further determines
the stock market prices such as FDI, Interest rate, NIFTY, SENSEX and money
supply, among with interest rate plays an important role in determining the stock
price.
 In “Causal Influence of Macroeconomics Factors Shock on Indian Stock Market:
Evidence from BSE Index” by Baranidharan and Dhivya (2020), the Indian stock
market is considered semi-strong form efficient and here market information and
investors significantly impact stock return.
 Aggarwal and Saqib (2017) in their article “Impact of macro economic variables of
India and USA on Indian stock market” mentioned that economic growth and
prosperity highly influence the capital market and the change in macroeconomic
variables can impact the stock market return.

In addition to that, GDP, inflation and interest rates also affect the Indian capital market
influence the investors’ decision-making in terms of investments. It further can be impacted
by increasing liquidity of economic assets and diversification of global risks.

4
Problem statement, objectives and scope of the study

Problem statement

 Although it cannot be denied that there is a dependency from macroeconomics

variables when it comes to stock price exchange, due to economic regression and
higher inflation rate, testing of all the parameters become significantly harder.

Objectives

 To understand the way macroeconomic variables create relationships with stock

prices
 To determine the way the macroeconomic variables can impact the stock prices of the
conglomerate industries

Scope of the study

 The study can help in analysing the way conglomerates utilise macroeconomic
factors while determining the stock price.

The particular study also faced certain limitations among which lack of research studies and
insufficient times are the most notable.

Research methodology

 The research methodology is the chapter that further employs specific techniques and
tools to identify, choose, process, as well as evaluate information regarding a topic.

 It also helps the topic to be analysed based on validity and reliability (Snyder, 2019).

 In terms of research design, the process of regression has been selected which further
has been evaluated based on the stock price of 5 conglomerate firms.

While doing the research, certain formulas have been utilised that further help in calculating
the return on the stock price, among which the formulas of Price Return, NIFTY Return, CPI
return, Gold Price return and Crude price return have been analysed.

5
Research methodology Conti.

 Since the research has conducted while utilising the quantitative data collection, data
has been collected from the companies’ official websites, annual report and stock
market.

 Apart from that several magazines, websites, and newspaper articles were also
considered.

 One of the most essential part while collecting data gathering information from NSE
websites since the study is based on NSE.

Apart from that, after collecting quantitative data, the results have been evaluated through
qualitative readings and to fulfil the purpose, secondary research has been done. MS EXCEL
was the main tool utilised for the study.

Data Analysis

 The regression analysis has been conducted so that the factual connection among the
dependent and independent variables can be understood.

 While doing the process, it further can be affirmed that NIFTY Return, Consumer
price index and Gold Price return are positively interconnected.

 Moreover, it cannot be denied that an increase in consumer price index can positively
impact return on the stock price.

After conducting on regression analysis on ITC, RIL, L & T, Marico and Piramal Group, it
further can be affirmed that all the above-mentioned factors positively impacted their return
on stock price and help them to achieve profit.

Findings

 While analysing all the results from using the regression model, it can be said that out
of the five companies, four companies which are ITC, RIL, L & T and Piramal
showed the positive impact of macroeconomics variables in their stock price as R
Square crossed 30%.
 However, in the case of Marico, it only crossed 23% which means that the model is
not fit for the company.

6
  However, for all the company NIFTY return significantly impacted their stock price
return.

This shows that overall, all the variables somehow impact the stock market return,
however, it varies from company to company as for some companies gold price and
consumer price index have a positive impact and for some company, oil price and NIFTY
index have a positive impact on the stock market.

Conclusion

 While concluding, it can be said that for conglomerate companies, several

macroeconomic factors impact their return on the stock price.
 Among them, the NIFTY index positively impacts their stock price.
 Apart from that, the Consumer Price index and Gold price, as well as the Exchange
rate, significantly impact the stock price.

In order to achieve a better understanding of the topic, further research needs to be

conducted on the correlation between the NIFTY index and Return on Stock price as its
impact is the highest.

7
Reference list

Aggarwal, P. and Saqib, N., 2017. Impact of macro economic variables of India and USA on
Indian stock market. International Journal of Economics and Financial Issues, 7(4), pp.10-
14.

Ahmed, S., 2008. Aggregate economic variables and stock markets in India. International
Research Journal of Finance and Economics, (14), pp.141-164.

Baranidharan, S. and Dhivya, N., 2020. Causal Influence of Macroeconomics Factors Shock
on Indian Stock Market: Evidence from BSE Index. Asian Journal of Economics, Finance
and Management, pp.39-48.

Filis, G., 2010. Macro economy, stock market and oil prices: do meaningful relationships
exist among their cyclical fluctuations?. Energy Economics, 32(4), pp.877-886.

Giri, A.K. and Joshi, P., 2017. The impact of macroeconomic indicators on Indian stock
prices: An empirical analysis. Studies in Business and Economics, 12(1), pp.61-78.

Khan, J. and Khan, I., 2018. The impact of macroeconomic variables on stock prices: A case
study Of Karachi Stock Exchange. Journal of Economics and Sustainable
Development, 9(13), pp.15-25.

Snyder, H., 2019. Literature review as a research methodology: An overview and

guidelines. Journal of Business Research, 104, pp.333-339.

Srivastava, A., 2010. Relevance of macro economic factors for the Indian stock
market. Decision, 37(3), p.69.

Tandon, K. and Malhotra, N., 2013. Determinants of stock prices: Empirical evidence from
NSE 100 companies. International Journal of Research in Management & Technology, 3(3),
pp.2249-9563.