GLOBAL ACADEMY OF TECHNOLOGY

T H E I M PA C T O F I N F L AT I O N , I N T E R E S T R AT E S A N D G D P
O N S TO C K P R I C E S -
A C O M PA R AT I V E A N A LY S I S

VISHWAS R, 1GA21BA107
Master of Business Administration

Internal Guide
DR. S. GOKULA KRISHNAN
Associate Professor
Department of Management studies and Research Centre

20/03/2023
 INTRODUCTION

• The stock market is a complex system influenced by many factors,

macroeconomic variables such as interest rates, inflation, and GDP are one
among them.
• The Indian stock market changed after economic liberalization, and
investors are now looking for high profits with minimal risk. The
fluctuations in the stock market are influenced by both internal and external
factors.
• However, there is limited understanding of the specific relationship
between these variables and stock prices in different industries.
 STATEMENT OF PROBLEM

• This study aims to assist investors in understanding the impulsiveness of

share prices. As investors always concerned about the companies internal
factors.
• Investors are faced with a dilemma of how to diversify their portfolio and
maintain a secure investment option.
• The results of the study will have practical implications for investors,
stakeholders, and policy makers who are interested in understanding the
external macro economic factors that influence share prices in India.
 OBJECTIVES OF THE STUDY

1. To ascertain the impact of macroeconomic variables on the share prices of

diverse companies of a variety of industries.

2. To know the relationship of macro economic variables on the share prices of

different industry

3. To know the forecasting of the macro economic variables on the different

industry share prices.

4. To provide better information for the investors and stakeholders when making
investment decision.
 LITRATURE REVIEW

• Kalam, 2022, Malaysian stock market performance are influenced by macroeconomic

factors. The primary focus of this study was on the influence of macroeconomic variables
on stock market returns. Multicollinearity regression analysis with unit root test are the
tools or tests utilised for the analysis. According to the hypothesis, the macroeconomic
variables GDP, IR, INF, ER, and foreign direct investment have a considerable influence on
the return on the Malaysian stock market (FDI).
• Kumar (2021), investigated the relationship between macroeconomic indicators and stock
market performance in India. The study aimed to predict the Indian stock market's behavior
based on macroeconomic variables. Panel analysis and correlation analysis were used to
examine the relationship between the variables. The study demonstrated how changes in
macroeconomic conditions impact the stock market.
 CONTINUED…
• Acharya & Mahapatra (2019) conducted a study on selected industries in India to determine
the impact of macroeconomic variables on share prices. The study used regression and
correlation analyses to quantify the relationship between macroeconomic factors and share
prices. The study aimed to discern the influence of specific macroeconomic components on
share prices in the Indian stock market. The outcome of the study was there was significant
influence of these economic factors differently on different industries stock.

• Nur Alam, 2020, According to his paper, the macroeconomic characteristics of five South Asian
nations influence stock market performance. The goal is to understand how these variables
affect stock market results. To accomplish this, regression analysis and model descriptive
analysis of granger causality were applied. The association between these characteristics and
stock market returns was discovered to be both favourable and negative in this study. The real
interest rate, inflation, the FDI-to-GDP ratio, and the exchange rate all have a negative impact
on the stock market return, but the GDP growth rate, the foreign currency reserve growth rate,
and the budget deficit all have a positive impact.
 CONTINUED...

Misra, 2018, Malaysian stock market performance are influenced by

macroeconomic factors. The primary focus of this study was on the influence
of macroeconomic variables on stock market returns. Multicollinearity
regression analysis with unit root test are the tools or tests utilised for the
analysis. According to the hypothesis, the macroeconomic variables GDP, IR,
INF, ER, and foreign direct investment have a considerable influence on the
return on the Malaysian stock market (FDI).
 RESEARCH DESIGN

• The descriptive research design is used in this study or the analysis to

comprehend the effects of the macroeconomic variables on the share prices of
the selected companies..

• The Data used is Secondary data collected from 1/4/2015 to 31/12/2022

• The sample size is top 3 companies in 5 different industries

• The Statistical tools used are Descriptives, Correlation, Regression and

Causality tests.
 FRAMEWORK

• DESCRIPTIVE: Summarize the data using measures of central tendency (e.g.,

mean, median, mode) and measures of variability (e.g., range, variance, standard
deviation).

• CORRELATION: r = (n * ΣXY - ΣX * ΣY) / sqrt[(n * ΣX^2 - (ΣX)^2) * (n * ΣY^2

- (ΣY)^2)]

• REGRESSION: Y = α + β1X1 + β2X2 + β3X3

• CAUSALITY: Y(t) = b0 + b1 Y(t-1) X(t-1) + e (t)

 HYPOTHESIS

1. H0: There is no significant impact of inflation on the share prices of the

selected companies under various industries.

2. H0: There is no significant impact of interest rates on the share prices of the
selected companies under various industries.

3. H0: There is no significant impact of GDP on the share prices of the selected
companies under various industries.
 CONTINUED...

1. H0: There is a significant relationship between inflation

rates and the share prices
2. H0: There is a significant relationship between interest
rates and the share prices
3. H0: There is a significant relationship between GDP
rates and the share prices
 CONTINUE

1. H0: There is a significant forecasting by inflation

rates and the share prices
2. H0: There is a significant forecasting by interest
rates and the share prices
3. H0: There is a significant forecasting by GDP
rates and the share prices
 DATA ANALYSIS AND INTERPRETATION

1. AGRICULTURE SECTOR
Descriptives: The means of macroeconomic variables are close to each other, but their standard deviation values are high,
indicating significant variation. The data for share prices, interest rates, and GDP rates are normally distributed, but inflation
rates are not normally distribute
Correlation: There is a significant relationship between inflation rates and share prices of Agriculture industries (0.474) with p
value < .001. As inflation rates increase, share price tends to increase.
There is a significant relationship between interest rates and share prices of Agriculture industries (-0.770) with p value < .001.
As interest rates increase, share price tends to decrease, and vice versa.
However, there is no significant relationship between share price and GDP rates.
Regression: The results show that the overall model is significant, with an R² of 0.972, indicating that changes of 97.2% is
impacted by the macroeconomic indicators and other 2.8% is impacted by other various factors.
The p value is <0.001 which states that H0 is rejected at 5% LOS, hence there is significant impact of inflation, interest rates and
GDP rates on Share prices of Agriculture companies
Causality: The changes Inflation rate and the GDP rate is not forecasting any changes in the share prices of the selected
companies because the p value is 0.09 and 0.63 respectively. Therefore H0 is accepted at 5% LOS, hence there is no effect of
Inflation rates and GDP rates on the share prices fluctuations. The interest rates is able to forecast the changes in the share prices
of the selected companies because the p value is 0.01. Therefore, H0 is rejected at 5% LOS, hence there is a effect on the share
prices due to the cause of the interest rates.
 C O N TI N U ED …
2. AUTOMOBILE SECTOR
Descriptives: The means of macroeconomic variables are similar, while the standard deviation values are high, indicating significant
variation in the data. The Shapiro-Wilk test suggests that share prices, interest rates, and GDP rates are normally distributed, but
inflation rates are not.
Correlation: There is a weak negative correlation between share price and inflation rates (-0.561) with p value < .001. Hence there is a
significant relationship between the inflation rates and share prices This means that as inflation rates increase, share price tends to
decrease, and vice versa.
strong positive correlation between share price and interest rates (0.610) with p value < .001 as interest rates increase, share price tends
to increase Hence there is a significant relationship between the interest rates and share prices
There is no significant relationship between share price and GDP rates (0.121) with p value 0.248.
Regression: The results show that the overall model is significant, with an R² of 0.969, indicating that changes of 96.9% is impacted
by the macroeconomic indicators and other 3.1% is impacted by other various factors..
The p value is <0.001 which states that H0 is rejected at 5% LOS, hence there is significant impact of inflation, interest rates and GDP
rates on Share prices of automobile companies.

Causality: The changes Interest rate and the GDP rate is not forecasting any changes in the share prices of the selected companies
because the p value is 0.146 and 0.202 respectively. Therefore, H0 is accepted at 5% LOS, hence there is no effect of Interest rates and
GDP rates on the share prices fluctuations. The Inflation rates is able to forecast the changes in the share prices of the selected
companies because the p value is 0.05. Therefore, H0 is rejected at 5% LOS, hence there is a effect on the share prices due to the cause
of the inflation rates.
 C O N TI N U ED …

3. INFRASTRUCTURE SECTOR
Descriptives: The mean values of inflation rates, interest rates, and GDP rates are close, while the standard deviation values
for the independent variables are high. The Shapiro-Wilk test shows that share prices, interest rates, and GDP rates are
normally distributed, but inflation rates are not..
Correlation: There is a positive correlation 0.340 between share price and inflation rates, There is also a positive correlation
0.345 between share price and GDP rates, when Inflation and GDP rises Share prices also increases.
A negative correlation – 0. 254 between share price and interest rates all of which are statistically significant..
Regression: The results show that the overall model is significant, with an R² of 0.984, indicating that changes of 98.4% is
impacted by the macro-economic indicators and other 1.6% is impacted by other various factors.

The p value is <0.001 which states that H0 is rejected at 5% LOS, hence there is significant impact of inflation, interest rates
and GDP rates on Share prices of infrastructure companies

Causality: The changes Inflation rate and the GDP rate is not forecasting any changes in the share prices of the selected
companies because the p value is 0.533 and 0.550 respectively. Therefore H0 is accepted at 5% LOS, hence there is no effect of
Interest rates and GDP rates on the share prices fluctuations. The Interest rates is able to forecast the changes in the share prices
of the selected companies because the p value is 0.01. Therefore, H0 is rejected at 5% LOS, hence there is a effect on the share
prices due to the cause of the interest rates.
 CONTINUED…

4. IT SECTOR
Descriptives: The means of inflation rates, interest rates, and GDP rates are similar, while the standard deviation values for the
independent variables are high. The Shapiro-Wilk test shows that share prices, interest rates, and GDP rates are normally
distributed, but inflation rates are not.
Correlation: There is a positive correlation 0.312 between share price and inflation rates, there is also a positive correlation
0.451 between share price and GDP rates, when Inflation and GDP rises Share prices also increases
A negative correlation -0.365 between share price and interest rates all of which are statistically significant in the IT industries.
Regression: The results show that the overall model is significant, with an R² of 0.963, indicating that changes of 96.3% is
impacted by the macroeconomic indicators and other 3.7% is impacted by other various factors.

The p value is <0.001 which states that H0 is rejected at 5% LOS, hence there is significant impact of inflation, interest rates
and GDP rates on Share prices of IT companies.

Causality: The changes Inflation rate, Interest rates and the GDP rate is not forecasting any changes in the share prices of the
selected companies because the p value is 0.770, 0.195 and 0.070 respectively. Therefore, H0 is accepted at 5% LOS, hence
there is no effect of Inflation rates, Interest rates and GDP rates on the share prices fluctuations.
 CONTINUED…

5. PHARMA SECTOR
Descriptives: The means of inflation rates, interest rates, and GDP rates are similar, while the standard deviation values for the
independent variables are high. The Shapiro-Wilk test shows that share prices, interest rates, and GDP rates are normally
distributed, but inflation rates are not.
Correlation: There is a strong positive correlation 0.573 between share price and inflation rates, and a strong negative
correlation between -.710 share price and interest rates for pharma industries.
However, there is no significant relationship between GDP rates and share prices for the pharma industry. >.05
Regression: The results show that the overall model is significant, with an R² of 0.981, indicating that changes of 98.1% is
impacted by the macro-economic indicators and other 1.9% is impacted by other various factors.

The p value is <0.001 which states that H0 is rejected at 5% LOS, hence there is significant impact of inflation, interest rates
and GDP rates on Share prices of pharma companies

Causality: The changes Inflation rate and the GDP rate is not forecasting any changes in the share prices of the selected
companies because the p value is 0.149 and 0.065 respectively. Therefore H0 is accepted at 5% LOS, hence there is no effect of
Interest rates and GDP rates on the share prices fluctuations. The Interest rates is able to forecast the changes in the share prices
of the selected companies because the p value is 0.01. Therefore, H0 is rejected at 5% LOS, hence there is a effect on the share
prices due to the cause of the interest rates.
 FINDINGS, SUGGESTIONS AND CONCLUSION

FINDINGS:
1. By the correlation analysis found that there is a strong
relationship between the inflation rates, interest rates
2. In some of the industry here is no relationship between GDP
and Share prices
3. From the regression analysis found that there is more impact
of the macro economics on the share prices of the different
companies of various industries.
4. From the causality analysis there is a forecasting from the
interest rates and inflation rates but the GDP forecasting is
not significant.
SUGGESTIONS: The study suggests that investors should not rely solely on
macroeconomic indicators and should consider other factors when making investment
decisions. Additionally, investors can choose better industry stocks for higher returns and
consider other companies besides top performers. The study highlights the need for
companies to also consider external uncontrollable factors when positioning themselves in
the market.

CONCLUSION: The study aimed to help people understand the impact of

macroeconomic indicators on share prices, as the stock market has become an important
part of the Indian economy. The study focused on top-performing companies in five
industries and provided reliable data to help investors make informed decisions. The
study concluded that infrastructure and pharma companies were heavily impacted, while
Agri, auto, and IT industries were also affected to a significant extent.
 REFERENCES

• Kalam, K. (2020). The effects of macroeconomic variables on stock market returns:

Evidence from Malaysia’s stock market return performance. Journal of World
Business, 55(8), 1-13.
• Kumar, (2019). Stock market performance & macro-economic variables: an empirical
study of Indian stock market, University of Delhi. 223-267.
• Acharya, P. N., & Mahapatra, R. P. (2018). Macro-economic factors and share price
behaviour: A study on selected industries in India. Parikalpana: KIIT Journal of
Management, 14(1), 146-160.
• Alam, Q. N. (2020). Impacts of macroeconomic variables on the stock market returns of
South Asian region. Can. J. Bus. Inf. Stud, 2(2), 24-34.
• Misra, P. (2018). An investigation of the macroeconomic factors affecting the Indian
stock market. Australasian Accounting, Business and Finance Journal, 12(2), 71-86.
THANK YOU