Nifty 50- Caused By FDI, WPI and Exchange Rate?

Abstract

The Indian stock market does not move in isolation and its returns are dependent upon economic parameters. The later play a pivotal role in influencing the returns f or markets. An investor who plugs his money in the stock market may take into account the fluctuations in such factors and accordingly plan his/her portfolio. Index returns may have a causal association with many Janitors in the economy; inflation rates, interest rates, foreign di reel investment flows, exchange rate mechanism, gross domestic product, monetary policy of central bank, crude oil prices Lo name a few. All of them may Loge/her contribute awards volatilely in stock returns. Thus, while designing strategies of investment due relevance must be given Lo them. This relationship has been tested in various time frames by taking a combination of different exogenous factors in short nm and long nm. The present study is emphasized lo establish association between change in the four variables and their causal linkages in the short run. It has been observed using Granger Causality that all the variables have causal relationship during the short run.