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Stock market is a term used to describe all transactions involving the buying and selling of stocks issued by a company Stock market Index is used to give information about the price movements of stocks. A stock market index is created by selecting a group of stocks that are representative of the whole market or a specified sector of the market.
The investor can use indices to allocate the funds rationally among the stocks Technical analysts use indices to predict future market
Stock is a share of ownership in the assets and earnings of a company Shareholders are entitled to a particular percent of the firms profit after tax Value of the share is enhanced in the Stock Exchange where lot of buyers demand for them. Reflects that more wealth is generated If the same demand grows year after year, it indicates that the economy of the nation is on the growing path
Stock prices
Household wealth
Consumption spending
GDP
An increase in stock prices will raise GDP While a decrease in stock prices will decrease GDP
Shares and securities traded in the Stock Exchanges act as a barometer of the economy. If the shares of most of the large companies go up on value steadily over a period it indicates that the economy is healthy. More and more investment pours into the shares from people observing this bullish trend of Stock markets.
Source-http://dipp.nic.in/fdi_statistics/india_fdi_index.htm
Conclusion
Although stock market is an economic indicator, it should be used in conjunction with other leading indicators such as interest rate, rate of inflation and money supply
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