Effect of Macroeconomics Variables on Sensex Finacle

8/3/2019 Effect of Macroeconomics Variables on Sensex Finacle

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Presented By

Ankit Kumar (11078)

Ashutosh Dubey (11083)

Puneet Jha (11035)

Mausam Thakrani (11022)


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Large + Economics Evaluation of economic policy

Fiscal policy and

Monetary policyBroad field of study

Macroeconomics


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Large + EconomicsFiscal policy and

Monetary policy

Broad field

Evaluation of economic

policy

Macroeconomics

Sensex

Index

Sensex goesup Nifty - NSE

BSE

DifferentIndex


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Budget

Inflation/Recession

Global Factor GDP

Political

factor

MonetaryPolicy


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Positive

NegativeSensex

Response

Feb 28 2007 sensex downby 541 points

Feb 26 2010 sensex up by175 points

Example


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Change inGovernment GovernmentPolicy


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DirectlyProportional

Corporateperformance


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Sensex - The Dancing Beauty of Indian

Stock Market
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impact of oil prices on the stock market.Everyone knows the importance of oil,the daily needs is increasing but theproduction unit cannot be equivalent,so the prices also varies Oil producingcountries and companies havingrefineries were not in a favor to buildmore refineries since the consumptionis more and more and since it is a nonrenewable resource, and decline of theproduction. It is very important thatyou understand the concept ofswingtrading.

Date & Year Sensex Reason

October 30, 200613,000

Fund infusion from market players, falling oil

prices

December 5,2006

14000

Strong FII inflow, healthy corporate earnings andcontinued strong economic data coupled with

slash in petrol and diesel prices have fuelled the

latest surge on the bourses.

21,000 Sensex

In sectoral indices Reality Index gave the highest

return of 32.50% followed by Consumer Durables

and Oil & Gas which gave a return of 26.63% &

19.85% respectively. Metal, FMCG and PSU gave

17.17%, 15.86% and 15.12% returns respectively
http://www.sharetipsinfo.com/swingtrading.htmlhttp://www.sharetipsinfo.com/swingtrading.htmlhttp://www.sharetipsinfo.com/swingtrading.htmlhttp://www.sharetipsinfo.com/swingtrading.htmlhttp://www.sharetipsinfo.com/swingtrading.html


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The prices of oil and the stock marketworks in opposite direction, with theincrease in oil price leads to the

decrease of the return in the Indianstock market, likewise decrease in oilprices leads to the increase in thereturn of Stock market. The greatdecline of the oil prices is not themajor cause of the Stock market

clashes.There can be a great advantage for theinvestors regarding the oil priceincrease ,if he buys one barrel of oil for30 dollar after few months if he priceincreases to 50 dollar per barrel .So ,it

shows that if he sells he will earn aprofit of 20 dollar per barrel ,which willbe great profit for the investor.


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The crude oil price impacts 2 key aspects of our economy:one, the import bill, since we are a net importer of oil;and two, inflation, since petroleum products are key constituents ofWholesale andConsumer Price Inflation Index.Higher import bill directly and indirectly impacts the rupee, whileinflation impacts interest rates, and hence even the rupee. These factorsobviously affect our GDP growth rates. All these factors individually andcollectively could have a negative impact on the stock market.

The increasing import bill will widen our Trade Balance, defined asExports minus Imports, which has been perpetually running at adeficit

Higher trade balance will adversely impact the fiscal deficit, whichin turn will impact the interest rates and hence the stock market


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Impact On The Stock MarketHaving enumerated ways in which oil prices could have detrimentalimpact on the economic fundamentals and hence the stock market,lets see how oil prices have actually impacted the stock marketmovements in the past, both in India and in the US. The two chartsbelow depict the movementof West Texas Intermediate (WTI), one of the benchmark grades ofcrude oil, vis--vis the BSE Sensex and S&P500.

How Interest Rates Impact the Stock Market).

Around 800 tons of oil is estimated to have

spilled into the sea. The oil spill has hitshipping companies the hardest as shipmovement to and from the ports of Mumbaiand JNPT had been suspended. These twoports handle 60 percent of India's containertraffic.


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It is generally believe that whenever oil prices move up significantly,stock market should fall, and the other way round too, i.e. there existsan inverse correlation between the two. In fact, even we have arguedon these lines in the earlier part of this report. The inference we getfrom this study, however,points to the contrary


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Few Observations: The oil prices and the market movements are NOT inversely correlatedat all! The Coefficient of Correlation and Coefficient of Determinationvalues are positive, implying that the market moves up while the oilprices do so! This is evident even visually in the charts above. If the twowereindeed inversely correlated, these correlation values should have beennegative.Given the above, it is clearly evident that oil prices aloneeven if itmoves up (or down) with a vengeancecannot and do not alter thestock market movements. We must, however, add here that we areheading toward unprecedented rise this time around, and a sustainedhigh oil prices could indeed have a telling impact on the economy andthe fragilely poised stock market, throwing the pastcorrelation to the winds

Documents

Effect of Macroeconomics Variables on Sensex Finacle