Impact of macroeconomic variables on the selected Indian sectoral indices: An empirical analysis

Abstract

Economic variables are interrelated with each other and such interplay amongst them produces a significant effect on the Investment pattern and brings stability in the business and economy. The present study has analysed the impact of Macroeconomic aggregates namely the Bank Interest Rate, Exchange Rate, Inflation (WPI), Crude oil prices and the Foreign Exchange Reserves of India on the selected NSE Sectoral Indices Series. For accomplishing the objective, the monthly time series data for the period of 10 years from January 2007 to December 2016 was analysed through the application of econometric techniques like Unit Root test, Ordinary least square model (OLS) and Correlation. The results stated that the combined effects of the macroeconomic variables on each of the Sector Indices were significant but the selected Macro factors had less explanatory powers. Finally, the analyses concluded a high strength of the relationship among all the selected sectors on account of close linkages among the various sectors which serves as an important tool for the investor to diversify their portfolio.