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Chapter I

Introduction And Design Of The

Study

CHAPTER-I

INTRODUCTION AND DESIGN OF THE STUDY


INTRODUCTION
Financial markets play a crucial role of developing an economy by facilitating the
capital formation. This capital formation is enhanced by the vibrant financial markets
which are channelizing the savings into investments. The investments increases the
productivity of the country and creates employment opportunities to the people of the
country. Thus capital markets which are part of financial markets play a Vitol role in the
development of an economy. Among the capital market stock market is the most
important market which has two segments viz, new issue market and secondary market.
If the secondary market is vibrant it would be providing liquidity to the investors and will
act as price determining mechanism of the existing equity instruments. Therefore, the
analyzing the performance of the secondary market has become one of the fascinating
areas of financial research domain.

Keeping this in view in the present study the

influence of the macro economic factors on the return from the stock market is analyzed.
MACRO ECONOMIC FACTORS
In the equity investment analysis the analysts follow two approaches one is
fundamental approach and the second is technical analysis. In the fundamental approach
fundamental factors like corporate performance, industrial growth, etc., are used to value
the securities considering the amount of influence on the equity shares. In this kind of
analysis the macro economic factors are playing a vital role. These macro-economic
Influence of selected macro-economic factors on equity return
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Chapter I

Introduction And Design Of The

Study

factors may be national income, inflation, return from alternative investments and the
like. Therefore, the influence of the selected macro-economic factors on the equity
returns has been considered as the main research area of the study.

STATEMENT OF THE PROBLEM


In the fundamental analysis the influence of the macro economic factors play a
vital role in determining the value of the shares, where the value of the share is
theoretically the present value of the future cash flows. Therefore, there is a need for
analyzing the influence of macro-economic indicators on the equity returns. Hence, the
present study attempts to analyze the relationship between the stock market return and
macroeconomic factors to identify whether the macro-economic factors are influencing
the stock market return are not.

IMPORTANCE OF THE STUDY


This study may help the stock holder to understand the importance of
macroeconomic factors to identify the performance of the stock market. This study may
be an eye opener to stock holders in the stock market.

Influence of selected macro-economic factors on equity return


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Chapter I

Introduction And Design Of The

Study

OBJECTIVES OF THE STUDY


The following are the objective of the present study

To examine the influence of Gold Return on Stock Market Return.


To identify the influence of Crude oil price change on Stock Return.
To analyze the influence of FII on Stock Market Return.
To probe into the influence of return from Silver on Stock Return.
To study the influence of appreciation or depreciation of foreign exchange

value on Stock Market Return.


To examine the influence of inflation rate on Stock Market Return.

METHODOLOGY
The present study is analytical in nature. It is carried out using the secondary data
which

are

collected

from

https://in.finance.yahoo.com,http://www.oanda.com,

http://economictimes.indiatimes.com, http://www.indexmundi.com. After collecting the


data the data have been analyzed using the Statistical Package for Social Sciences. In the
analysis in order to analyze the influence of macro-economic indicators on the equity
returns simple linear regression and step wise multiple regression have been used. These
regression results have been tested using the t-distribution test.

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Chapter I

Introduction And Design Of The

Study

The following formula has been used to calculate rate of return from the Equity
return from the market:
Rmt = (NIFTYt - NIFTYt-n) / NIFTYt-n * 100
Rmt is the return from the stock market
NIFTY is the value of NSE fifty Index
t is the period on which the return is calculated
n is the holding period under consideration.
Similarly for the purpose of calculating the rate of inflation the following formula has
been used:
Rit = (CPIt - CPIt-n) / CPIt-n * 100
Ri is the rate of inflation
CPI is the value of consumer Price Index
t is the period on which the return is calculated
n is the holding period under consideration.

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Chapter I

Introduction And Design Of The

Study

For calculating the rate of change in the exchange value of the currency the the exchange
value of INR against USD has been considered and calculated using the following
formula:
Er =(USDt - USDt-n) / USDt-n * 100
Er is the exchange value of USD
USD is the value of one Dollar of the United States of America
t is the period on which the exchange value is calculated
n is the holding period under consideration.
To calculate the rate return from the alternative investments such as Gold and
Silver the following formula has been used:
Rgt = (GOLDt - GOLDt-n) / GOLDt-n * 100
Rmt is the return from the alternative investment gold market
GOLD is the value of Gold Price in Bombay
t is the period on which the return is calculated
n is the holding period under consideration

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Chapter I

Introduction And Design Of The

Study

CHAPTER DESIGN
Chapter- I deals with introduction and design of the study in which the introduction about
the study, statement of the problem, Importance of the study, Objectives of the study and
Methodology are presented.
Chapter-II provides the details of the training organization titled as Profile of Angle Stock
Broking Limited., in which the following information are provided.

Angel broking carries out the following business


Vision statement
Motto statement
Work culture
The Human resource philosophy of the company
Employee engagement
Branch of the company
Awards

Chapter-III deals with the analytical part of the study titled as M acro-Economic Factors and
Equity Returns in which the influence of macro-economic factors on the equity returns has been
analyzed and the results are presented.

Chapter- IV deals with the summary of findings, suggestions & conclusion.

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