Essay On Macroeconomics

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Data Analysis And Interpretation
5.1 Introduction:

This study is to examine the impact of macroeconomic variables on the Indian bank industry’s stock returns. This study measures the variation of banks ‘stock returns to economic variables such as Consumer Price Index (CPI),and Exchange rate (Ex Rate). CPI is a measure of inflation; Exchange rate is the measurement of Indian rupee (INR) towards the foreign currencies like USD, SGD and JPY.

The data collection of the study is based on the secondary data. The data for the variables (CPI, Exchange rate) were obtained from RBI website. The data for the 5 bank’s monthly share prices (HDFC bank, AXIS Bank, ICICI Bank, IDBI Bank and YES Bank) were obtained from the NSE websites. The data for the study was taken for period of 36 months, which are the most recent 3 years data from 1st January 2009 to 31st December 2011 because to measure the impact of the variables chosen on the banks stock returns, post-recession. The data for all variables is monthly. The studies like Ibrahim (1999), Patra and Poshakwale (2006) and Liow et al. (2006) capture long-term movements in volatility by used monthly returns to avoid spurious correlation problem.
The choice of the banks is guided by the fact that they are listed companies in NSE F&O segment. The statistical package used is MS EXCEL windows 7 version. In order to analyse the co-movements between the dependent and independent variable simple regression method is used.

5.2 Research Gap Of The Study:
Worldwide stock market always deals with the exchange of currency. For this factor, we expect that exchange rate would negatively relate to banks’ stock returns. Thus, we make assumption that, when currency in a country becomes higher, it w...

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...s i.e., less than 0.5 .and also it is even negative for IDBI and HDFC bank. Hence there is no significant relationship between the 2 variables.

Conclusion:
Hence from the analysis we can conclude that the inflation have an impact on the banks stock returns but to a very small extent. Hence the null hypothesis is rejected and alternative hypothesis is accepted , i.e., there is significant impact of inflation on the bank’s stock returns . more over the F statistic values and the probability values of both the independent variables i.e., the impact of exchange rates and inflation are showing a positive relationship with the bank stock returns.
The reasons for the bank stock returns not having much impact by the exchange rate and inflation could be because many other factors might be impacting the bank stock returns which may be internal or external to the banks .

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