AN INVESTIGATION OF SHORT TERM AND LONG TERM RELATIONSHIP BETWEEN SELECT MACROECONOMIC VARIABLES AND STOCK MARKET PERFORMANCE IN INDIA

The study investigates the short term and long term relationship between select macroeconomic factors and stock market performance as measured by performance of Nifty 50 index of National Stock Exchange (NSE) in India using monthly log-transformed dataset for a period of ten years from 2012-2013 to 2021-2022. For analysing the long term and short term linkages amongst the select economic variables multiple correlation, regression, cointegration and error correction technique have been employed after performing different diagnostic tests like, test for serial correlation, heteroscedasticity, normality, and stability. The positive long term relationship among the select indicators is observed using Johansen cointegration method which indicates that the variables is going jointly in a positive way with upward movement of Nifty 50 return. However, only the short term causality is identified between the Nifty 50 return and interest rates and employing the error correction technique which implies that any change in the interest rate is having a direct impact on the Nifty 50 index. The findings of the study can help the investors in forecasting long term and short term movements of stock market and framing their decisions on investment by examining the movements of macro-economic variables considered in the study.