EFFECT OF INTERNAL AND EXTERNAL FACTORS ON

INDIAN STOCK MARKET VOLATILITY

Master Thesis Report submitted in partial fulfilment of the requirements for the
degree of

Master of Business Administration

By

RAGHAV AGARWAL
2028004

Under the Guidance of

PROF ANIRUDDHA OAK

School of Business and Management

Christ (Deemed to Be University), Bangalore

JAN-2022
 EFFECT OF INTERNAL AND EXTERNAL FACTORS ON
INDIAN STOCK MARKET VOLATILITY

Master Thesis Report submitted in partial fulfilment of the requirements for the
degree of

Master of Business Administration

By

RAGHAV AGARWAL
2028004

Under the Guidance of

PROF ANIRUDDHA OAK

School of Business and Management

Christ (Deemed to Be University), Bangalore

JAN-2022
 DECLARATION

I hereby declare that the Master Thesis entitled " Effect of Internal and External factors on
Indian Stock Market Volatility" has been undertaken by me for the Master of Business
Administration award. I have completed this study under the guidance of PROF.
ANIRUDDHA OAK.

I also declare that this thesis report has not been submitted for the award of any Degree,
Diploma, Associateship, Fellowship, or any other title, in Christ (Deemed to Be University)
or any other university.

Place: Bengaluru < Signature >

Date: Raghav Agarwal

2028004
 Certificate

This is to certify that the Master Thesis report submitted by Sai Viswanath P on the title "
Effect of Internal and External factors on Indian Stock Market Volatility." is a record of
Master Thesis work done by him/her during the academic year 2020-21 under my guidance
and supervision in partial fulfilment of Master of Business Administration. The Thesis has
not been submitted for the award of any Degree, Diploma, Associateship, Fellowship or any
other title, in CHRIST (Deemed to be University) or in any other university

Place: Bengaluru <___Signature of faculty mentor__>

Date: Prof. ANIRUDDHA OAK.

Assistant Professor

Institute of Management

Christ (Deemed to Be University)

Bengaluru
 Acknowledgment

I am indebted to many people who helped me accomplish this Master Thesis successfully.

First, I thank the Vice-Chancellor, Dr. Fr. Abraham V. M., Christ (Deemed to Be University),
for giving me the opportunity to do my Thesis.

I thank Dr. Jain Mathew, Dean; Prof. Jeevananda, Associate Dean; Prof. Krishna M.C., Head
of the Department; and Mareena Mathew, Head-Finance, Institute of Management, Christ
(Deemed to Be University) for their kind support.

I thank PROF. ANIRUDDHA OAK for his support and guidance during the course of my
thesis. I remember him with much gratitude for his patience and motivation, but for which I
could not have submitted this work.

I thank my parents for their blessings and constant support, without which this Master thesis
would not have seen the light of day.

Raghav Agarwal
2028004
 TABLE OF CONTENTS Page
No.
Chapter
No.
1
Introduction 8

2
Literature Review 9

3
Research Methodology 20

4 Data Analysis & Interpretation 20

5
Conclusion 20

6
References 25
 Table List of Tables Page No.
No.
1 Descriptive Statistics of Dependent and Independent 22
Variables

2 Augmented Dickey Fuller Stationary Test Results (ADF) 23

3 Model GARCH (1,1) Results 24

INTRODUCTION
The phenomenon that occurs lately is that the movement of the Indian stock price index
which is proxied by the National stock Exchange (NSE) is related to two groups of influential
factors namely; global stock exchanges and macroeconomic indicators. Changes that occur in
global stock exchanges are quickly responded by Indian stock exchanges, so that the
movements of the Indian stock exchanges move together with the global stock exchanges.
Some world and regional stock exchanges that are considered to represent global stock
movements include; Singapore Straits Times Index (STI), China Shanghai Stock Exchange
Index (SSE), Japan Nikkei 225 Index (N225), United States Dow Jones Industrial Average
Index (DJIA) and British Financial Times Stock Exchange 100 (FTSE100) Index. These five
indices are considered capable of representing global stock indices in Asia, the United States
and Europe and are able to represent the strength of the world economy that can influence the
Indian stock market.

The average movement of the National stock Exchange (NSE) for 10 years with an index of 5
countries tends to move with the same pattern. This condition also shows that global stock
exchanges are integrated with each other.

Indian stock price movements are also influenced by a number of macroeconomic indicators,
among them; interest rates and exchange rates. An increase in interest rates causes investors
to divert their funds to money market instruments that provide higher and safer yields,
thereby causing share prices to decline. In line with interest rates, an increase in the inflation
rate causes share prices to fall because consumers reduce demand for goods so that corporate
profits are reduced. Depreciation in the exchange rate of the rupees against the US dollar
tends to cause share prices to be corrected, because investors in the Indian stock market are
dominated by foreign investors, so that when foreign currencies strengthen, they tend to exit
the stock market by selling large shares.

Lately the Indian market has become highly volatile and hence the sensitivity has been
increased on Indian index market by macro-economic variable.

OBJECTIVES
● To understand the volatility of the Indian stock market.
● To understand the influence of macroeconomic variable on Indian stock market.
● The influence of global stock exchanges on the movement of Indian stock index.
LITERATURE REVIEW
1. The Influence of Domestic and Foreign Shocks on Portfolio Diversification Gains
and the Associated Risks

This paper assesses the impact of foreign or homegrown securities exchange return and
unpredictability shocks on powerful restrictive connections (DCCs) between global
financial exchanges and relationship instability. The relationships between's business
sectors have suggestions for the additions from portfolio expansion, while connection
volatilities can be viewed as dangers to portfolio broadening. In the meantime,
homegrown shocks are sourced from the return and return unpredictability from 24
created, arising, and outskirts securities exchanges. The US financial exchange is the
wellspring of unfamiliar shocks. The homegrown and unfamiliar shocks are determined
utilizing market-based returns and under negative economic situations. It is gauge
multivariate dramatic summed up autoregressive contingent heteroskedasticity (E-
GARCH) models utilizing day by day and month to month MSCI based stock value
information of chose created, arising, and boondocks markets over 1993:1–2014:1.

2. Volatility Timing in CPF Investment Funds in Singapore: Do They Outperform

Non-CPF Funds?

The purpose of this study is to examine the volatility-timing performance of Singapore-

based funds under the Central Provident Fund (CPF) Investment Scheme and non-CPF
linked funds by taking into account the currency risk effect on internationally managed
funds. In particular, it empirically assesses whether the funds under the CPF Investment
Scheme outperform non-CPF funds by examining the volatility-timing performance
associated with these funds. The volatility-timing ability of CPF funds will provide the
CPF board with a new method for risk classification. To employ the GARCH models and
modified factor models to capture the response of funds to market abnormal conditional
volatility including the weekday effect.

3. IMPACT OF THE GLOBAL FINANCIAL CRISES ON THE MAJOR ASIAN

COUNTRIES AND USA STOCK MARKETS AND INTER-LINKAGES AMONG
THEM

This review looks at the effect of the worldwide monetary emergency on the securities
exchanges returns of China, Japan, India, and the USA through the E-GARCH model.
Likewise, it explores the idea of instability overflows between stock files during the
 worldwide monetary emergency utilizing the Granger Causality test. Day-by-day stock
costs are utilized from the sixth of January 2006 to the twenty-second of April 2011. The
primary discoveries are as per the following. In the first place, in all securities exchanges,
high instability and mishap on the expected returns exist because of the monetary
emergency. Further, the worldwide monetary emergency less influenced the Shanghai
stock trade than the other financial exchanges though it greatly affected the USA financial
exchanges. Likewise, stock returns unpredictability gets directed in the significant Asian
Countries financial exchanges after the post-emergency period; however, it has stayed in
the USA stock trades.

4. Investigating Equilibrium Relationship between Macroeconomic Variables and

Malaysian Stock Market Index through Bounds Tests Approach

The current paper directs an authentic assessment into a long time ago run and short-run
harmony connections between macroeconomic factors and the Malaysian financial
exchange list (SMI) for the 1977-2011 period. In particular, it utilizes Ng and Perron's
(NP) limits insights test to recognize the limits of factors stationarity. Consequently, the
co-coordinating connections among factors are tried utilizing the limits F-measurement
test. Ultimately, since quite a while ago, run and short-run harmony connections have
been examined utilizing Psarian, Shin, and Smith (PSS) limits tests Approach. The
outcomes demonstrate that all macroeconomic factors are co-coordinated with SMI.
Moreover, understanding the since quite a while ago run and short-run balance
connections between macroeconomic factors and SMI could be profoundly considerable
according to the viewpoints of policymakers, monetary business analysts, homegrown
and global financial backers managing Malaysian securities exchange.

5. The Influence of International Stock Markets and Macroeconomic Variables on the

Thai Stock Market

The paper looks at the effect of a few financial exchange value records and
macroeconomic factors on the Thai securities exchange, utilizing a GARCH-M model
and month-to-month information (1988-2004). It tracks down that:

1. Progressions in returns in Singapore, Malaysia, and Indonesia before the 1997 emergency
and changes in Singapore, the Philippines, and Korea after 1997 promptly affected the
Thai securities exchange returns.
2. Changes in oil costs contrarily affected on it are simply preceding 1997.
3. Unpredictability grouping and a GARCH-M model were available just before 1997.
4. Markets outside the locale quickly affected the Thai market.

6. Stock Market Volatility: Examining North America, Europe and Asia

Understanding unpredictability in financial exchanges is significant for deciding the

expense of capital and surveying speculation and influencing choices as instability is
inseparable from hazard. Generous changes in the unpredictability of monetary business
sectors are fit for having critical adverse consequences on hazard opposed financial
backers. Utilizing day-by-day gets back from 1992 to 2002, It explores unpredictability
co-development between the Singapore financial exchange and the business sectors of the
US, UK, Hong Kong, and Japan. To check instability development, It utilizes
econometric models of (I) Univariate GARCH (ii) Vector Autoregression, and (iii) a
Multivariate and Asymmetric Multivariate GARCH model with GJR expansions.

7. Modelling A Modelling Australian st alian stock mark ock market volatility: a

multiv olatility: a multivariate GARCH ariate GARCH approach

This paper utilizes a multivariate summed up autoregressive contingent heteroskedasticity

(MGARCH) model to understand the idea of cooperation between securities exchange
returns of four nations, specifically Australia, Singapore, the UK, and the US. Utilizing
week-by-week information spreading over from January 1992 to December 2008, the
outcomes demonstrate that all business sectors (especially Australia and Singapore) show
huge positive mean-overflows from the US financial exchange returns yet not the other
way around. It likewise discovered solid proof for both own and cross ARCH and
GARCH impacts among each of the four business sectors, showing the presence of
critical instability and cross unpredictability overflows across every one of the four
business sectors. Given a severe level of normal time-fluctuating co-unpredictability
among these four nations, financial backers will be profoundly far-fetched to help a
decrease of hazard on the off chance that they expand their monetary portfolio with stocks
from these four nations as it were.

8. Study on stock market volatility spill over effect based on TVP-VAR model.
 Using the time-fluctuating VAR model and drive reaction investigation, it looks at the
powerful effect of instability from unfamiliar organizations recorded and their
commitment to the super securities exchange in Japanese, Korean, Hong Kong, and
Singapore markets during the time of 2000 ~ 2018. It tracks down that the host markets
have a positive reaction to the unpredictability impacts of unfamiliar organizations. All
the more explicitly, the increment of the unfamiliar organization instability will cause the
increment of the host market instability. Results show that instability of unfamiliar
organizations from mature business sectors didn't cause greater unpredictability in to have
markets. Strangely, unfamiliar organizations from developing business sectors will bring
more grounded instability spill over to have markets.

9. THE DYNAMICS OF RETURNS AND VOLATILITY IN THE EMERGING AND

DEVELOPED ASIAN REIT MARKETS

This paper looks at the elements of return and instability overflows across the REIT
markets of Japan, Singapore, Hong Kong, Malaysia, Taiwan, Thailand, and South Korea
from June 2006 to May 2011. The developing business sectors offer lower returns than
the created advertises; however, lower hazard too. The arising REIT file beat the created
REIT record on a danger changed premise. The investigation proposes that connections
among Asian REIT markets are generally low, going from 0.14 to 0.42 over the full-
example time frame. The outcomes further show that connections among arising REIT
markets are lower than those among created markets. In any case, connections are non-
consistent after some time and expanded during the new Global Financial Crisis. The
outcomes from the EGARCH models show a solid propensity for REIT getting back to
communicate from created markets (e.g., Japan and Singapore) to arising REIT markets.
Concerning instability transmission, the instrument seems, by all accounts, to be
multidirectional.

10. Macroeconomic Variables and Stock Market Returns: Panel Analysis from Selected
ASEAN Countries

This paper means to analyse the impact of macroeconomic factors, explicitly swelling,
cash supply (MS), and swapping scale (ER) on both traditional and Islamic financial
exchange returns in the three chose ASEAN nations (Singapore, Malaysia, Indonesia) by
using the month-to-month information over the time of January 2005 to December 2015.
 Applying the board least-square relapse methods, the outcomes show that the ER and
swelling rate essentially influence securities exchange returns. MS is observed to be
inconsequential. The discoveries of this paper likewise presume that swelling represents a
more noticeable impact and is contrarily identified with the securities exchange returns.
For this situation, there is a requirement for revision in money-related arrangements to
guarantee that the expansion rate is set at a low level since the outcomes would have the
option to carry an effect on support the capital market in the chose ASEAN nations.

11. Dynamic Integration of Domestic Equity Price, Foreign Equity Price and
Macroeconomic Indicators: Evidence from Malaysia

How does the extent of integration of the Malaysian equity market with the equity
markets of Japan and USA vary at different time scales? How dynamic is the extent of co-
movement of equity price with the major macroeconomic indicators of Malaysia? In order
to answer these two major issues, this study attempts to investigate the dynamic
integration of the Malaysian equity market with the equity markets of Japan and USA,
along with the three major macroeconomic control variables: exchange rate, consumer’s
price index (CPI) and industrial production (IP) of Malaysia. The methodology applied
initially used the standard time series techniques such as, Johansen cointegration
technique, vector error correction model (VECM), variance decompositions (VDCs),
followed by the application of the recent dynamic rolling cointegration, Beveridge-
Nelson (BN) time series decompositions and finally, wavelet coherence of time-scale
decompositions on monthly data starting from February,1990.

12. STOCK MARKET CO-INTEGRATION: AN INVESTIGATION OF SOUTH

ASIAN COUNTRIES

This Report examined the mix of Asian stock trades and demonstrated the enhancement
openings for potential financial backers they give in the long haul. This review inspects
the financial exchange co-mix among Indian and South Asian nations if they are co-
coordinated to one another, which will ultimately be helpful for the singular financial
backers alongside corporate financial backers in choosing their venture region and
portfolio broadening, on the off chance that the securities exchanges have any
cointegration, then expansion may not be productive. This Report experimentally dissects
the wonder of co-joining among chosen South Asian financial exchanges. Increased
 Dickey-Fuller (ADF), Co-reconciliation, and Granger Causality tests are applied to the
information.

13. Financial liberalization, exchange rates and stock prices: Exogenous shocks in four
Latin America countries

This paper provides an analysis of the long-run relationships and short-run dynamics
between stock prices and exchange rates as well as the channels through which
exogenous shocks influence these markets. It uses monthly data for the period January
1980 to February 2009 for four Latin America, namely, Argentina, Brazil, Chile and
Mexico. It conducts the analysis by means of cointegration analysis and
multivariate Granger causality tests. The main finding of the analysis suggests that stock
and foreign exchange markets in these economies are positively related and that the U.S.
stock market acts as a channel for these links. Moreover, it is shown that these links are
independent of foreign exchange restrictions. Finally, stability tests proposed by Hansen
and Johansen (1993) are applied and it is shown that the dimension of the cointegration
space is sample independent while the estimated coefficients exhibit instability in
recursive estimations. Instability in these long-run relationships is evident during the
Mexican currency crisis of 1994–1995, the Asian crisis of 1997 and the 2007–2009 credit
and financial crisis.

14. Volatility Nexus Between Stock Market and Macroeconomic Variables in

Bangladesh: An Extended GARCH Approach

This paper looks at the unpredictability of the Bangladesh securities exchange returns
because of the instability of the macroeconomic factors utilizing month to month
information of available records of Dhaka Stock Exchange (DSE) and four
macroeconomic factors (Call Money Rate, Crude Oil Price, Exchange Rate, and SENSEX
of Bombay Stock Exchange) from January 2001 to December 2015. The aftereffects of
GARCH-S models uncover that the unpredictability of macroeconomic factors
fundamentally directs the instability of DSE return, for example, conversion scale and
SENSEX. In particular, the unpredictability of the DSE is relied upon to 19% expansion
by 1% increment of conversion scale. In addition, the unpredictability of the Bangladesh
financial exchange returns is relied upon to hose somewhere near 2% with an expansion
in the instability of Indian financial exchange of 1%. Hence, it can remark that adding
 conversion scale or stock returns of India in the GARCH model gives critical information
about the conduct of the DSE instability.

15. Macroeconomic variables and stock prices in emerging economies: A panel analysis
This study aims to explore the role of the macroeconomic variables and stock prices for
emerging economies perspective. Further, the study examines the association between the
macroeconomic variable and stock prices across the panel of India and Brazil. The study
utilizes monthly data from 2000M1-2016M08. It employs various panel econometric
techniques. The findings confirm that the long run relationship between variables and
unidirectional causality. The results also reveal that GDP, inflation, exchange rate,
interest rate and stock prices play an important role in economic development.

16. The Impact of Macroeconomic Variables on Stock Prices: A Case Study of Karachi
Stock Exchange

Venture choices are profoundly impacted by macroeconomic factors, like changes in

macroeconomic factors impact securities exchanges diversely as per the country's
monetary conditions and governance arrangements. The review contributes by deciding
the impact of different macroeconomic factors on stock costs of Pakistan by investigating
the month-to-month information from May 2000 - August 2016. As every one of the
factors is fixed at first contrast along these lines, the ideal ARDL approach of bound
testing is applied to look at the present moment and long haul cointegration of the
macroeconomic factors on stock costs. The discoveries recommend that the Karachi
Stock Exchange stock costs in the long haul are altogether influenced by cash supply,
conversion standard, and loan fee. In the momentary, every one of the factors is irrelevant
aside from the conversion standard, which is contrarily cointegrated with stock costs. The
national bank will be cautious while changing the cash supply in the market because an
excessive expansion in cash supply could influence venture just as financial exchange.

17. Effects of Exchange Rate Volatility on the Stock Market: A Case Study of South
Africa

This paper explains the impacts of cash instability on the Johannesburg Stock Exchange.
An assessment of writing on conversion scale instability and financial exchanges was led
coming about into detail of an experimental model. The Generalized Autoregressive
Conditional Heteroskedasticity (1.1) (GARCH) model set up the connection between
 swapping scale unpredictability and financial exchange execution. The review utilized
month-to-month South African information for the period 2000 – 2010.

18. US Stock Market and Macroeconomic Factors

This paper breaks down the connection between the US securities exchange and some
significant US macroeconomic components, like GDP, the buyer value list, the
mechanical creation list, the joblessness rate, and long-haul loan costs. All functional
elements show genuinely critical associations with the financial exchange aside from the
shopper value list, and the signs are predictable with the discoveries of past writing.

19. Capital Market Integration of Selected ASEAN Countries and its Investment
Implications

This paper explores the powerful reconciliation of ASEAN6 financial exchanges

(Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam) with worldwide
securities exchanges (the US, the ASEAN coalition, and Asia) in an ARMA-EGARCH-M
and a vector autoregression models (VAR) utilizing week by week value gets back from
January 2000 to October 2015. The communication channels between these business
sectors give essential data to financial backers about conceivable venture doors into these
ASEAN6 nations. The reliance design of startling returns between the US and ASEAN6
nations and the Global Finance Crisis (GFC) virus are investigated in the paper.

20. Correlations in Price Changes and Volatility across International Stock Markets

The short-run relationship of costs and value unpredictability across three significant
worldwide financial exchanges is contemplated. Every day was inspected, opening and
shutting costs of significant stock lists for the Tokyo, London, and New York financial
exchanges. The examination uses the autoregressive restrictively heteroskedastic (ARCH
group of measurable models to investigate these estimating connections. Proof of value
unpredictability overflows from New York to Tokyo, London to Tokyo, and New, York
to London has been noticed. Yet, no value instability overflow impacts in different ways
are found for the October 1987 period.

21. Efficient Tests for an Autoregressive Unit Root

 The asymptotic force envelope is determined for the point-ideal trial of a unit root in the
autoregressive portrayal of a Gaussian time series. The creators propose a group of tests
whose asymptotic force capacities are digression to the force envelope at one point and
are never far beneath. When the series has an obscure mean or straight pattern, regularly
utilized tests are observed to be overwhelmed by individuals from the group of point-
ideal invariant tests. The creators propose a changed adaptation of the Dickey-Fuller t-
test, which has advantageous size properties and significantly further developed force
when an obscure mean or pattern is available. Copyright 1996 by The Econometric
Society.

22. MODELING AND FORECASTING REALIZED VOLATILITY

This paper gives an overall structure to joining of high-recurrence intraday information

into the estimation, demonstrating, and determining of day by day and lower recurrence
return volatilities and bring circulations back. Most strategies for displaying and
anticipating monetary resource return volatilities, relationships, and disseminations
depend on conceivably prohibitive and confounded parametric multivariate ARCH or
stochastic unpredictability models. Utilization of acknowledged instability developed
from high-recurrence intraday returns, conversely, grants the utilization of conventional
time-series techniques for demonstrating and determining. Expanding on the hypothesis
of nonstop time exchange free value measures and the hypothesis of quadratic variety, it
creates formal connections between acknowledged unpredictability and the restrictive
covariance lattice. Then, utilizing consistently recorded perceptions for the
Deutschemark/Dollar and Yen/Dollar spot trade rates covering over ten years, it found
that gauges from a basic long-memory Gaussian vector autoregression for the logarithmic
every day acknowledged volatilities perform commendably contrasted with an assortment
of famous day by day ARCH and more confounded high-recurrence models.

23. The Day of the Week Effect on Bursa (Bourse) Malaysia Shariah Compliant Market
The diversity between interests in Shariah agreeable stocks and regular stock is that,
while the previous depends on the capital market set of rules and law, the last follows not
just the capital market set of laws and yet, in addition, the Islamic standards of exchanges.
The vast majority of the past examinations inspect issues identified with the ordinary
stocks and market. The current review makes one stride further by examining issues
identified with the Shariah-agreeable instrument. In particular, the current review
 analyzes the end of the week impact of the Islamic Shariah list return intermediary by the
Kuala Lumpur Shariah Index (KLSI), FBM Emas Shariah, and FBM Hijrah Emas
Shariah. Utilizing the OLS strategy from 21 May 2007 until 19 September 2008, the
investigation discovers that the day of the week impact is present just in the Malaysian
Shariah market of KLSI and not intended for FBM Emas Shariah and FBM Hijrah
Shariah. In particular, the outcome shows huge negative Monday returns and positive
Friday returns in the Kuala Lumpur Shariah Index. The outcome recommends that the
market isn't productive, a finding like those of customary financial exchange in numerous
nations.

24. Stock Market Volatility and Macroeconomic Variables Volatility in Nigeria: An

Exponential GARCH Approach

This review utilized AR (k)- EGARCH (p, q) strategy to inspect the instability in
financial exchange and macroeconomic factors and utilized the LA-VAR Granger
Causality test to dissect the nexus between securities exchange unpredictability
macroeconomic factors instability in Nigeria for the periods 1986 to 2010 utilizing time-
series information. The aftereffects of the discoveries uncovered a bi-causal connection
between financial exchange unpredictability and genuine GDP instability. There is no
causal connection between financial exchange instability and the unpredictability in loan
cost and expansion rate. The review prescribed that to lessen the unpredictable financial
exchange. The government should support active jobs in building a steady market by
tapping the developing revenue of general individuals by expanding the supply of offers.

25. The Indonesia Stock Exchange and Its Dynamics: An Analysis of the Effect of
Macroeconomic Variables

The relationship among some macroeconomic variables such as the exchange rate, world
oil prices, and international capital market index with the Indonesian stock market
(Indonesia Stock Exchange/IDX)’s dynamics still interesting to study. Some studies still
found inconsistent results, and its dependence on the dynamics of the international capital
market and financial market, especially when there was turmoil in the international stock
markets, such as the economic crisis in America. Those conditions made it interesting to
examine whether there are influences from the Dow Jones index, the Rupiah exchange
rate toward the US Dollar, and world oil prices toward the JCI. Therefore, this study uses
 a period of data that includes the period of data used by several previous studies that
examined the JCI as the object, namely data for the period of 2005- 2016. This research
aims to study the effect of macroeconomic variables: Dow Jones Industrial Average,
USD/IDR, and World Crude Oil Price towards the Jakarta Composite Index (JCI) during
the period of 2005-2016. Using the daily closing prices of Dow Jones Industrial Average
(JCI), USD/IDR, World Crude Oil Price, and Jakarta Composite Index, the GARCH (1,1)
analysis showed that Dow Jones Industrial Average and World crude oil price had a
positive significant effect on the JCI while USD/IDR had a negative significant effect on
JCI. The findings implied the importance to consider macroeconomic variables when
investing in the Indonesia Stock Exchange.

26. Effects of Exchange Rate Volatility on the Stock Market: The Zambian Experience
This paper analyzes the impacts of swapping scale instability on the securities exchange
in Zambia. The receptiveness of Zambia's economy is perceived as a reason for the
instability of its market. A more critical gander at the unfamiliar conversion standard
history in Zambia shows a significant degree of instability. No work has been done on the
impact of the conversion standard unpredictability on the financial exchange in the
Zambian setting. Like this, it is beneficial to investigate the impact of Zambia's unfamiliar
swapping scale unpredictability on its financial exchange. Time series information was
utilized, which ranged from 2000-2015. GARCH (1,1) model was utilized in setting up
the connection between conversion scale unpredictability and securities exchange returns.

27. Relationship between developed, European and South Asian stock markets: a
multivariate analysis

The assessment of interdependence between stock markets is an important aspect of

international portfolio management. This study aims to examine and highlight the
diversification potential of South Asian stock markets vis-à-vis developed and European
stock markets. Design/methodology/approach the developed stocks markets include U.S
and UK, and South Asian stock markets include India, Pakistan and Sri Lanka while DJ
STOXX 600 index is used to represent the European stock markets. Monthly data is used
to examine long-run relationship through ARDL bound testing approach and estimates
are obtained using DLOS. Short-term dynamics are captured through Vector Error
Correction (VEC) based Granger Causality. Findings South Asian stock markets are
closely linked with each other; similarly, developed/European markets are interlinked.
 U.S stock market not only impacts European stock markets, it also Granger cause South
Asian stock markets.

28. Influence of Macroeconomic Variable on Indian Stock Movement: Cointegration

Approach

The motivation behind this review is to investigate the impact of recognized

macroeconomic factors on Indian stock returns during the post advancement time frame
utilizing the Vector Error Correction Model (VECM). It was tracked down that the nine
macroeconomic factors have both long-haul relationships and transient relationships with
SENSEX returns. This reality gave insight into intriguing interrelationships between
various macroeconomic factors, guiding additional changes in the developing business
sector.

29. Inter linkages of Indian Stock Market with Advanced Emerging Markets

This paper examines the short run and long run inter linkages of the Indian stock market
with those of Advanced emerging markets viz. Brazil, Hungary, Taiwan, Mexico, Poland
and South Africa over the period ranging from 1 January 1992 to 31 December 2009
using Johansen co-integration test and Granger’s causality test. The analysis of daily data
shows that the short run and long run inter linkages of the Indian stock market with these
markets has increased over the study period. Unidirectional causality is found in most
cases. The findings have important implications for investment and speculative decisions.

30. The Interplay Between the Thai and Several Other International Stock Markets

The paper examines the impact of different worldwide financial exchange value lists and
relevant macroeconomic factors on the Thai securities exchange value list, utilizing a
GARCH-M model and month-to-month information from January 1988 to December
2004. It is found, bury Alia, that (a) progressions in securities exchange returns in
Singapore, Malaysia, and Indonesia in the pre-1997 Asian emergency, and changes in
Singapore, the Philippines, and Korea in the post-1997 time promptly affected returns in
the Thai securities exchange; (b) changes in the cost of unrefined petroleum contrarily
affected on the Thai financial exchange just in the pre-Asian emergency time frame; (c)
unpredictability bunching.

METHODOLOGY
Data on National Stock Exchange Index (NSE) as the dependent variable will be sourced
from the National Stock Exchange.

For independent variable data consisting of macroeconomic variables, namely; interest rates
and exchange rates are sourced from RBI.

Global stock exchanges, represented by the United States stock exchanges (DJIA), the United
Kingdom (FTSE100), Japan (N225), China (SSE), and Singapore (STI) will be sourced
from Yahoo finance.

DATA COLLECTION
The Sample of the data collected is shown below where data of all variables are collected
from on weekly basis from April 2011 to January 2022.

DATA ANALYSIS AND INTERPRETATION

Descriptive statistics show the amount of data, the maximum value, the minimum value, the
average value and the standard deviation of each dependent variable (X) and the
independent variable (Y).

The results of descriptive statistical data processing are as the following table.

  Variable Data Mean Media S.D. Min Max

n
 X NSE 561 9117 8588 3145 4624 18339
Y1 INR/US 561 64.55 65.13 7.441 48.96 76.54
Y2 INR/Euro 561 77.15 77.23 6.537 64.4 90.09
Y3 Policy Repo Rate 561 6.491 6.5 1.386 4 8.5
Y4 Reverse Repo Rate 561 5.806 6 1.227 3.35 7.5
Y5 Marginal Standing 561 7.16 7 1.75 4.25 10.25
Y6 Bank Rate 561 6.916 6.75 1.68 4.25 10.25
Y7 DJIA 561 20797 18240 6604 10771 36338
Y8 EUROSTOXX50 561 3191 3230 482.2 2026 4370
Y9 JP225 561 18301 19235 5773 8160 30500
Y10 SZSE 561 10582 10300 2167 7162 18098
Y11 FTSE Singapore 561 312.7 319.4 24.8 244.9 370.6
Table 1 Descriptive Statistics of Dependent and Independent Variables

Descriptive statistical analysis results obtained in general the highest INR/US level of 76.54
and the lowest of 48.96. The lowest INR/EURO rate was 64.4 and the highest was 90.09. The
lowest Policy Repo Rate was 4% and the highest was 8.5%. The lowest Reverse Repo Rate
was 3.35% and the highest was 7.5%. The lowest Marginal Standing was 4.25% and the
highest was10.25%. The lowest Bank Rate was 4.25% and the highest was 10.25%. The
lowest DJIA index was 10771 and the highest was 36338. The lowest EUROSTOXX50
index was 2026 and the highest was 4370. The lowest JP225index was 8160 and the highest
was 30500. The lowest SZSE index was 7162 and the highest was 18098. The lowest FTSE
Singapore index was 244.9 and the highest was 370.6.

Stationarity testing is done with a unit root test using the Augmented Dickey Fuller (ADF)
test based on a comparison between the ADF probability value with a significance level of
5%. If the ADF probability value is 5%. Testing the first difference level (1st difference
level) shows that all research data is stationary.

Variable Unit root ADF Test critical values Probabilit

test test y
Statistic
      1% 5% 10%  
level level level
NSE Level -2.98004 0.742 0.462 0.348 0.0028
  1st -22.656 0.742 0.462 0.348 0.1
Differenc
e
INR/US Level -1.79177 0.742 0.462 0.348 0.0696
  1st -19.3789 0.742 0.462 0.348 0.1
Differenc
e
INR/Euro Level -0.90724 0.742 0.462 0.348 0.3234
  1st -16.7737 0.742 0.462 0.348 0.1
 Differenc
e
Policy Repo Rate Level 0.10758 0.742 0.462 0.348 0.7168
3
  1st -3.4895 0.742 0.462 0.348 0.037
Differenc
e
Reverse Repo Rate Level 0.01275 0.742 0.462 0.348 0.6868
3
  1st -3.83584 0.742 0.462 0.348 0.042
Differenc
e
Marginal Standing Level 1.23243 0.742 0.462 0.348 1.23243
  1st -8.18147 0.742 0.462 0.348 0.1
Differenc
e
Bank Rate Level -0.03285 0.742 0.462 0.348 0.6719
  1st -23.622 0.742 0.462 0.348 0.1
Differenc
e
DJIA Level -2.64261 0.742 0.462 0.348 0.007977
  1st -25.8168 0.742 0.462 0.348 0.1
Differenc
e
EUROSTOXX50 Level -1.0458 0.742 0.462 0.348 -1.0458
  1st -24.4312 0.742 0.462 0.348 0.1
Differenc
e
JP225 Level -1.87927 0.742 0.462 0.348 0.05746
  1st -23.434 0.742 0.462 0.348 0.1
Differenc
e
SZSE Level -0.76572 0.742 0.462 0.348 0.3848
  1st -21.3946 0.742 0.462 0.348 0.1
Differenc
e
FTSE Singapore Level -0.1743 0.742 0.462 0.348 0.6235
  1st -13.3187 0.742 0.462 0.348 0.1
Differenc
e
Table 2 Augmented Dickey Fuller Stationary Test Results (ADF)

Estimates of the GARCH (1,1) model indicate that all macroeconomic variables used in this
study significantly influence the NSE movement, where the Reverse repo rate, Marginal
Standing and Bank Rate variables are negative and the exchange rates are positive. For global
stock exchanges, the United States, Europe and Japan stock exchanges have positive effects,
while the Singapore and Chinese stock exchanges have negative effects. The results of the
calculation of the F-test value in the GARCH (1,1) model with a probability value of 0.0000
at a confidence level of 99 percent (α = 1%), which means H0 is rejected, meaning that all
variables are independent of macroeconomic factors (Bank rate, Exchange rates) and global
stock exchanges (DJIA, EUROSTOXX50, JP225, SZSE, FTSE Singapore) in the GARCH
(1,1) model together significantly influence JCI movement.

Variable coefficient std. z p-value

error
INRUS 7.50783 7.72053 0.9725 0.3308
INR/Euro 7.38153 4.43526 1.664 0.0961 *
Policy Repo Rate 984.143 144.918 6.791 0.00 ***
Reverse Repo Rate −422.773 136.488 −3.098 0.002 ***
Marginal Standing −549.385 36.4678 −15.06 2.75E-51 ***
Bank Rate −82.0039 20.3144 −4.037 5.42E-05 ***
DJIA 0.272071 0.01324 20.54 9.29E-94
5 ***
EUROSTOXX50 0.57506 0.06960 8.262 1.43E-16
2 ***
JP225 0.0924322 0.01231 7.508 6.02E-14
2 ***
SZSE −0.013224 0.01167 −1.133 0.2573
8 4
FTSE Singapore −1.52466 0.97813 −1.559 0.1191
2
Table 3 Model GARCH (1,1) Results

* Significance of 1% level
** Significance of 5% level
*** Significance of 10% level
Based on the results of the GARCH (1,1) model, the equation model of the GARCH (1,1)
model can be written as follows.

NSE = 7.50783INRUS + 7.38153INREURO + 984.143PolicyRepoRate −

422.773ReverseRepoRate −549.385MarginalStanding −82.0039BankRate + 0.272071DJIA +
0.57506EUROSTOXX50 + 0.0924322JP225 − 0.0132248SZSE −1.52466FTSE Singapore

Based on empirical findings show that macroeconomic variables, in the form of; interest rates
and exchange rates have a significant effect on the NSE movement. The variable interest
rates have a negative effect, while the exchange rate has a positive effect. The negative
influence of interest rates on stock prices shows that when interest rates rise, investors look
for investment alternatives such as bonds, so demand for shares decreases and stock prices
will fall.

An increase in interest rates causes the discount rate to increase, which means a final decrease
in the present value of future cash flows that negatively impacts stock prices. While several
other studies found a positive relationship with interest rates. They explain the reason when
the Federal Reserve raises interest rates more (less) than expectations then it is considered
bad news (good) for the stock market, it means that the influence of interest rates is positive,
but bad news has a strong impact on the stock market.

With the traditional approach which states that exchange rate depreciation can increase the
country's external competitiveness and improve the trade balance and real output. As a result,
the company's profitability increases with an increase in the exchange rate or depreciation
and thus the stock price volatility increases. This result also implies that international trade
plays an important role in India and especially for companies listed on the stock market.
Another explanation reveals that the exchange rate in the stock market is important for the
performance of fund portfolios.

At the same time currency depreciation also makes imported goods expensive, so if a country
is highly dependent on imports of production inputs, currency depreciation will negatively
affect the economy. international markets, so that demand for these goods increases and more
cash flow into the country. At the same time currency depreciation also makes imported
goods expensive, so if a country is highly dependent on imports of production inputs,
currency depreciation will negatively affect the economy.

Estimation results show that global stock the United States, UK and Japan stock exchanges
have positive effects, while the Singapore and Chinese stock exchanges have negative effects.

CONCLUSION
The movement of stock prices in the Indian stock exchange is strongly influenced by changes
that occur in both macroeconomic variables and changes in global stock exchanges. Any
changes that occur in macroeconomic variables will have an impact on the movement of
Indian stock prices. This is due to the fact that the price of shares formed is a reflection of
investor expectations of earnings and dividends that are much influenced by changes in
economic conditions. The research highlights two indicators of macroeconomic variables that
affect stock prices, namely; interest rate and exchange rate. The interest rate affect stock
prices negatively, while the exchange rate affects positively. The results are in line with the
research hypothesis and support many previous studies that the interest rate have a negative
effect, and the exchange rate has a positive effect.
The influence of global stock exchanges on the movement of Indian stock exchanges, many
studies prove that the US and UK stock markets affect the global stock market, the stock
markets of Japan and China affect the Asian stock market, and Singapore affects the ASEAN
stock market. India is an open economy, so the Indian stock market is influenced by the stock
markets of other countries both globally and regionally. In addition, the five research sample
countries, namely: the United States, the United Kingdom, Japan, China, and Singapore are
India's main trade partners. The study is based on the hypothesis that the five global stock
exchanges that serve as the research sample, namely: the stock exchanges of the United
States, Britain, Japan, China, and Singapore positively affect the Indian stock market.
Empirical findings prove that the US, UK and Japan stock exchanges have a positive effect,
while Singapore and China stock exchanges have a negative effect. While the UK stock
exchange cannot influence the movements of the Indian stock market. The results of the
study also confirm many previous studies that the United States stock exchange globally has
a strong influence, while the Singapore stock exchange for the ASEAN region. This is due to
the fact that the United States financial markets have become the world's financial epicentre,
while Singapore is for ASEAN countries. Singapore and China stock exchanges have the
opposite and weak impact on Indian stock exchanges, because indeed the two countries are
more focused on foreign direct investment rather than portfolio investment.

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