Title: Linkage between global economic variables and Indian stock market

Authors: Sachita Yadav

Addresses: Department of Management and Commerce, Faculty of Management and Humanities, Manav Rachna University, Faridabad, Haryana, India

Abstract: Favourable global economic variables play an important role for the sustainable development of an emerging economy. This study empirically examines the linkage of the Indian stock market (CNX Nifty) with the major global economic variables, i.e., global stock market, crude oil price, gold price, foreign direct investment, foreign exchange rate, and foreign exchange reserves for the period January 2014 to June 2019. The study put significant implications on formative the macroeconomic policies of the nation. With the help of econometric models like co-integration test and vector Granger causality test, data has been analysed. The result showed that there is an existence of positive relationship between Indian stock market and six global economic variables, but has a strong correlation found with S&P 500 and FDI. To check whether the variables are integrated in a long run or not the Johansen co-integration test has been applied on the time series data. This revealed the fact that all the variables are co-integrated in a long run. The test of causality resulted that there is an existence of unidirectional causality from CNX Nifty to FDI and S&P 500 to CNX Nifty.

Keywords: stock market; global economic variables; correlation; Johansen co-integration test; vector Granger causality test.

DOI: 10.1504/IJCA.2020.112859

International Journal of Critical Accounting, 2020 Vol.11 No.6, pp.473 - 486

Received: 14 May 2020
Accepted: 06 Jul 2020
Published online: 07 Feb 2021 *

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