Stock market

movements and GDP

are positively
correlated

By Akash Aggarwal,Akash Yadav

Ajay sharma, Abhishek Madaan, Avantika Mehta
1
 Agenda

1 2 3 4 5
Overview Introduction Real time Hypothesis Conclusion
to data and Result
Stock Market correlation
&GDP

2
 1

Overview

3 3
 2
Introduction to
Share market &
GDP

4 4
 Stock Exchange
 Shares Buy & Sell
 Called as Stock market
 India is having Bombay stock exchange (BSE) and National Stock exchange (NSE)
 BSE is 12th largest stock exchange of world with approximately 5000 companies listed.
 Index of BSE is Sensex and number of stocks in sensex in 30.
 Top 30 companies are selected based on free float market capitalisation.

5 5
 GDP

The equation that's used to calculate GDP is as follows:

GDP = Consumption + Government Expenditures + Investment + Exports - Imports

Nominal vs Real GDP

6 6
 3
Real time data &
Correlation

7 7
 Correlation
 Correlation coefficients are used in statistics to measure how
strong a relationship is between two variables.

Pearson’s correlation coefficient formula

8 8
 GDP
 Year 2014
Items
1. Agriculture, forestry &
fishing
2. Mining & quarrying
3. Manufacturing
4. Electricity, gas ,water
G
r supply
o
w
5. Construction
t Q1 6. Trade, hotels, transport,
h
Q2 7. Financial, real estate &
r
a
Q3
Q4
services
t 8. Public administration,
e
defense
9. GVA at Basic Price
10. GDP

Items

9 9
 Sensex Data
 Year 2000-01

f(x) = 222.88x + 3116.01

R² = 0.79

Linear ()

Correlation= 0.890332

10 10
 Sensex Data
 Year 2008-09

f(x) = 2878.53x - 7204.67

R² = 0.95

Linear ()

Correlation= 0.97533

11 11
 Sensex Data
 Year 2012-13

f(x) = - 337.53x + 20077.83

R² = 0.14

Linear ()

Correlation= -0.38062

12 12
 Sensex Data
 Year 2013-14

f(x) = - 850.86x + 25546.69

R² = 0.58

Linear ()

Correlation= -0.76174

13 13
 Sensex Data
 Year 2014-15

f(x) = - 905.44x + 33269.47

R² = 0.3

Linear ()

Correlation= -0.5482

14 14
 Sensex Data
 Year 2015-16

f(x) = - 1161.17x + 35747.19

R² = 0.53

Linear ()

Correlation= -0.7285

15 15
 Sensex Data
 Year 2016-17

f(x) = - 795.03x + 33022.66

R² = 0.43

Linear ()

Correlation= -0.65475

16 16
 Sensex Data
 Year 2017-18

f(x) = 1798.17x + 20448.23

R² = 1
SENSEX

Linear ()

GDP

Correlation= 0.999121

17 17
 3

Hypothesis
Result

18 18
 Stock market movements and GDP
Stock market movements and GDP are NEGATIVE correlated

19 19
 4
Conclusion

20 20
 Stock market movements and GDP
GDP growth hits 3-year low in Q1; how it may impact market on Friday 

- Economic times, 31 Aug, 2017

21 21
Conclusion
 Expectations of the economy are built into prices of
stocks

 Companies have many ways to grow profits

 The economy is based on gross and the stock market is

15 times net

 The stock market is linked to the total of all shares, not

to the average price per share

22
Conclusion
“The economy and the stock market are like “chalk
and cheese”

 Prices are determined by shifts in supply and demand, which

may or may not parallel whether GDP growth is strong, weak, or
nonexistent.

 Unemployment is clearly bad for the economy, but is arguably

good for companies in the stock market

 The stock market is not the same companies over time

23
The stock market does what it does – grows
significantly long term with 1 or 2 bear
markets per decade – generally regardless of
what happens in the economy.

24
 Thank you

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