Project report on Relationship Of Inflation with Indian Stock Market

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Degree of Bachelor of Business Studies
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INDIAN
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INDIAN
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A Project Report submitted in
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Partial Fulfillment of the
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Roll No. 12035234032
KESHAV MAHAVIDYALAYA
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(UNIVERSITY OF DELHI)
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ABSTRACT
The relationship between stock prices and inflation has been subjected to
extensive research in the past decades and has arouse the interests of
researchers, academics, practitioners and policy makers globally, particularly
since the 1990s. This research paper tries to examine the relationship of
inflation with Indian stock market and also what impact inflation leave on
Indian Stock Market. Further this research paper attempt to investigate to
what extent inflation affects stock market. For this purpose some stock
indexes are selected to see the effect of inflation. These indexes are BSE
SENSEX, NSE NIFTY, BSE BANKEX, BANK NIFTY, BSE Consumer
Durables, and BSE FMCG.
In my research, the inflation data is taken according to CPI (consumer price
index). The statistical has used in this research to do the analysis based on
yearly to find out the relationship between inflation and stock market.

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Table of Content
Title of Chapter page no.
 Acknowledgement…………………………………………..5
 Inflation: An Introduction…………………………………...6
 Causes of Inflation…………………………………………..6-7
 Cost of Inflation……………………………………………..7-8
 How inflation is Measured…………………………………..8-9
 Inflation in India……………………………………………..10-12
 Issue
 Optimal Inflation Rate
 Money Supply and Inflation
 Global trade
 Factors………………………………………………………12-14
 Demand factors
 Supply factors
 Domestic factors
 External factors
 Value
 What is Stock Market……………………………………….15
 Types of Stock Market in India……………………………..
 BSE: Bombay Stock Exchange……………………………..16
 NSE: National Stock Exchange……………………………..17
 What are the effect of inflation on an economy……………..17-18
 How does Inflation affect Stock Market …………………….18
 How are companies affected by inflation and how does investor view the
impact……………………………………………………….18
 Literature Review………………………………………….19-20
 Research Objective………………………………………...21
 Research Methodology…………………………………….22
 Hypothesis………………………………………………….23-24
 Observation…………………………………………………25-48
 Relation between inflation with BSE Sensex, CNX Nifty, BSE
Bankex, Bank Nifty, BSE Consumer Durables, BSE FMCG
 Conclusion………………………………………………….49-50
 Limitation of study………………………………………….51
 Bibliography………………………………………………..52

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Acknowledgement
One of the best parts of preparing this project is the opportunity to thank those who have
contributed to its preparation. The list of expression of thanks – no matter how extensive is
always incomplete and inadequate, these acknowledgements are no exception.
Therefore, I would like to thank my teacher of Finance, Ms. Kangan Jain, for her unwavering
guidance and help in completing this research project. Her suggestions and support to
improve my research methodology was valuable for the completion of this project
successfully. I am also very thankful to all the people who answered my questions willingly
and participated in my research for giving me their precious time. Also, I wish to thank all
those authors whose journals I referred to and websites like Wikipedia and Investopedia in
order to provide valuable information to complete my project. Finally, I thank my fellow
students who helped me wherever I needed help, and enabled me to complete my project on
time.
Rohit Kumar
2063

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INTRODUCTION
INFLATION
 It is defined as the rise in the general price level and fall in the money value
 It occurs when the amount of buying power is more than the output of goods and services.
 It also occurs when the amount of money exceeds the amount of goods and services available
TYPES OF INFLATION
1) Creeping inflation
2) Trotting inflation
3) Galloping inflation
4) Hyper inflation
CREEPING INFLATION- when there is general rise in prices at very low rates, which is 2-
4% annually
TROTTING INFLATION- when there is rise in price to almost 5%
GALLOPING INFLATION- when rate is increased with a noticeable speed and at a
remarkable rate usually from 10-20%
HYPER INFLATION-when the inflation rate rise to over 20%
CAUSES OF INFLATION
DEMAND-PULL INFLATION:-
 Occurs when the consumers, businesses and the governments’ demand for goods and services
more than the supply; therefore the cost of item rises unless the supply is perfectly elastic
 The increase in demand is created from in increase in other areas, such as the supply of
money, the increase of wage which would then give rise in disposable income, and once the
consumer have more disposal income this would lead to aggregate spending
 As a result in aggregate spending there would also be an increase in demand for exports and
possible hoarding and profiteering from producers. The excessive demand, the price of final
goods and services would be forced to increase and this increase give rise to inflation

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COST-PUSH INFLATION
 Cost push inflation is caused by an increase in production costs. It is generally caused by an
increase in wages or an increase in the profit margin of the entrepreneurs
MONETARY INFLATION
Monetary inflation occur when there is an excessive supply of money. It is understood that
the government increase the money supply faster than the quantity of goods increase, which
result in inflation. Interestingly as the supply of good increase the money supplyhas to
increase or else price actually go down
STRUCTURAL INFLATION
Planned inflation that is caused by government’s monetary policy is called structural
inflation. This type of inflation is not caused by the excess of demand or supply but is built
into an economy due to governments’ monetary policy.
In developed countries they are characterized by a lack of adequate resources like capital,
foreign exchange, land and infrastructure. Furthermore, over-population with the majority
depending on agriculture for livelihood means that there is a fragmentation of landholdings.
There are other institutional factors like land-ownership, technological backwardness and low
rate of investment in agriculture.
IMPORTED INFLATION
Another type of inflation is imported inflation. This occur when the inflation of goods and
services from foreign countries that are experiencing inflation are imported and the increase
in prices for that imported goods or services will directly affect the cost of living.
COSTS OF INFLATION
Almost everyone thinks inflation is evil, but it isn't necessarily so. Inflation affects
different people in different ways. It also depends on whether inflation is anticipated
or unanticipated. If the inflation rate corresponds to what the majority of people are
expecting (anticipated inflation), then we can compensate and the cost isn't high. For
example, banks can vary their interest rates and workers can negotiate contracts that
include automatic wage hikes as the price level goes up.
Problems arise when there is unanticipated inflation:

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 Creditors lose and debtors gain if the lender does not anticipate inflation
correctly. For those who borrow, this is similar to getting an interest-free loan.
 Uncertainty about what will happen next makes corporations and consumers
less likely to spend. This hurts economic output in the long run.
 People living off a fixed-income, such as retirees, see a decline in their
purchasing power and, consequently, their standard of living.
 The entire economy must absorb repricing costs ("menu costs") as price lists,
labels, menus and more have to be updated.
 If the inflation rate is greater than that of other countries, domestic products
become less competitive.
People like to complain about prices going up, but they often ignore the fact that
wages should be rising as well. The question shouldn't be whether inflation is rising,
but whether it's rising at a quicker pace than your wages.
Finally, inflation is a sign that an economy is growing. In some situations, little
inflation (or even deflation) can be just as bad as high inflation. The lack of inflation
may be an indication that the economy is weakening. As you can see, it's not so easy
to label inflation as either good or bad - it depends on the overall economy as well as
your personal situation.
HOW IN FLATION IS MEASURED?
Measuring inflation is a difficult problem for government statisticians. To do this, a
number of goods that are representative of the economy are put together into what is
referred to as a "market basket." The cost of this basket is then compared over time.
This results in a price index, which is the cost of the market basket today as a
percentage of the cost of that identical basket in the starting year.
In North America, there are two main price indexes that measure inflation:

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 Consumer Price Index (CPI) - A measure of price changes in consumer goods
and services such as gasoline, food, clothing and automobiles. The CPI
measures price change from the perspective of the purchaser. CPI data can be
found at the Bureau of Labor Statistics.
 Wholesale price index (WPI)- The Wholesale Price Index (WPI) is the price of a
representative basket of wholesale goods. Some countries ( like the Philippines) use
WPI changes as a central measure of inflation.But now India has adopted new CPI to
measure inflation. However, United States now report a producer price index instead.
 Producer Price Indexes (PPI) - A family of indexes that measure the average
change over time in selling prices by domestic producers of goods and services.
PPIs measure price change from the perspective of the seller. U.S. PPI data can
be found at the Bureau of Labor Statistics.
You can think of price indexes as large surveys. Each month, the U.S. Bureau of
Labor Statistics contacts thousands of retail stores, service establishments, rental units
and doctors' offices to obtain price information on thousands of items used to track
and measure price changes in the CPI. They record the prices of about 80,000 items
each month, which represent a scientifically selected sample of the prices paid by
consumers for the goods and services purchased.
In the long run, the various PPIs and the CPI show a similar rate of inflation. This is
not the case in the short run, as PPIs often increase before the CPI. In general,
investors follow the CPI more than the PPIs.

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INFLATION IN INDIA
The annualized inflation rate in India is 5.37% as of February 2015, as per the Indian ministry
of statistics and programme implementation. This represents a modest reduction from the
previous annual figure of 9.6% for June 2011. Inflation rates in India are usually quoted as
changes in the Wholesale Price Index, for all commodities.
Many developing countries use changes in the Consumer Price Index (CPI) as their central
measure of inflation. India used WPI as the measure for inflation but new CPI(combined) is
declared as the new standard for measuring inflation ( April 2014) [[1]
] CPI numbers are
typically measured monthly, and with a significant lag, making them unsuitable for policy
use. Instead, India uses changes in the Wholesale Price Index (WPI) to measure its rate of
inflation.
Provisional annual inflation rate based on all India general CPI (Combined) for November
2013 on point to point basis (November 2013 over November 2012) is 11.24% as compared
to 10.17% (final) for the previous month of October 2013. The corresponding provisional
inflation rates for rural and urban areas for November 2013 are 11.74% and 10.53%
respectively. Inflation rates (final) for rural and urban areas for October 2013 are 10.19% and
10.20% respectively.
The WPI measures the price of a representative basket of wholesale goods. In India, this
basket is composed of three groups: Primary Articles (20.1% of total weight), Fuel and Power
(14.9%) and Manufactured Products (65%). Food Articles from the Primary Articles Group
account for 14.3% of the total weight. The most important components of the Manufactured
Products Group are Chemicals and Chemical products (12%); Basic Metals, Alloys and
Metal Products (10.8%); Machinery and Machine Tools (8.9%); Textiles (7.3%) and
Transport, Equipment and Parts (5.2%).
WPI numbers are typically measured weekly by the Ministry of Commerce and Industry.
This makes it more timely than the lagging and infrequent CPI statistic.
ISSUE
The challenges in developing economy are many, especially when in context of the monetary
policy with the Central Bank, the inflation and price stability phenomenon. There has been a
universal argument these days when monetary policy is determined to be a key element in

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depicting and controlling inflation. The Central Bank works on the objective to control and
have a stable price for commodities. A good environment of price stability happens to create
saving mobilization and a sustained economic growth. The former Governor of RBI C.
Rangarajan points out that there is a long-term trade-off between outputand inflation. He adds
on that short-term trade-off happens to only introduce uncertainty about the price level in
future. There is an agreement that the central banks have aimed to introduce the target of
price stability while an argument supports it for what that means in practice.
THE OPTIMAL INFLATION RATE
It arises as the basis theme in deciding an adequate monetary policy. There are two debatable
proportions for an effective inflation, whether it should be in the range of 1-3 per-cent as the
inflation rate that persists in the industrialized economy or should it be in the range of 6-7
per-cents. While deciding on the elaborate inflation rate certain problems occur regarding its
measurement. The measurement bias has often calculated an inflation rate that is
comparatively more than in nature. Secondly, there often arises a problem when the quality
improvements in the product are in need to be captured out, hence it affects the price index.
The consumer preference for a cheaper goods affects the consumption basket at costs, for the
increased expenditure on the cheaper goods takes time for the increased weight and
measuring inflation. The Boskin Commission has measured 1.1 per cent of the increased
inflation in USA every-annum. The commission points out for the developed countries
comprehensive study on inflation to be fairly low.
MONEY SUPPLY AND INFLATION
The Quantitative Easing by the central banks with the effect of an increased money supply in
an economy often helps to increase or moderate inflationary targets. There is a puzzle
formation between low-rate of inflation and a high growth of money supply. When the
current rate of inflation is low, a high worth of money supply warrants the tightening of
liquidity and an increased interest rate for a moderate aggregate demand and the avoidance of
any potential problems. Further, in case of a low output a tightened monetary policy would
affect the production in a much more severe manner. The supply shocks have known to play
a dominant role in the regard of monetary policy. The bumper harvest in 1998-99 with a
buffer yield in wheat, sugarcane, and pulses had led to an early supply condition further
driving their prices from what were they in the last year. The increased import competition

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since 1991 with the trade liberalization in place have widely contributed to the reduced
manufacturing competition with a cheaper agricultural raw materials and the fabric industry.
These cost-saving driven technologies have often helped to drive a low-inflation rate. The
normal growth cycles accompanied with the international price pressures has several times
being characterized by domestic uncertainties.
GLOBAL TRADE
Inflation in India generally occurs as a consequence of global traded commodities and the
several efforts made by The Reserve Bank of India to weaken rupee against dollar. This was
done after the Pokhran Blasts in 1998.[4]
This has been regarded as the root cause
of inflationcrisis rather than the domestic inflation. According to some experts the policy of
RBI to absorb all dollars coming into the Indian Economy contributes to the appreciation of
the rupee.[5]
When the US dollar has shrieked by a margin of 30%, RBI had made a massive
injection of dollar in the economy make it highly liquid and this further triggered
offinflation in non-traded goods. The RBI picture clearly portrays forsubsidizing exports with
a weak dollar-exchange rate.All these account for a dangerous inflationary policies being
followed by the central bankof the country.[6]
Further, on account of cheap products
being importedin the country which are made on a high technological and capital intensive
techniques happen to either increase the price of domestic raw materials in the global market
or they are forced to sell at a cheaper price, hence fetching heavy losses.
FACTORS
There are several factors which help to determine the inflationary impact in the country and
further help in making a comparative analysis of the policies for the same.The major
determinant of the inflation in regard to the employment generation and growth is depicted by
the Phillips curve.
DEMAND FACTORS
It basically occurs in a situation when the aggregate demand in the economy has exceeded the
aggregate supply. It could further be described as a situation where too much money chases
just few goods. A country has a capacity of producing just 550 units of a commodity but the
actual demand in the country is 700 units. Hence, as a result of which due to scarcity in
supply the prices of the commodity rises. This has generally been seen in India in context
with the agrarian society where due to droughts and floods or inadequate methods for the

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storage of grains leads to lesser or deteriorated output hence increasing the prices for the
commodities as the demand remains the same.
SUPPLY FACTORS
The supply side inflation is a key ingredient for the rising inflation in India. The agricultural
scarcity or the damage in transit creates a scarcity causing high inflationary pressures.
Similarly, the high cost of labor eventually increases the production cost and leads to a high
price for the commodity.The energies issues regarding the cost of production often increases
the value of the final output produced. These supply driven factors have basically have
a fiscal tool for regulation and moderation. Further, the global level impacts of price rise
often impactsinflation from the supply side of the economy.
Consensus on the prime reason for the sticky and stubbornly highConsumer Price Index, that
is retail inflation of India, is due to supply side constraints; and still where interest rate
remains the only tool with The Reserve Bank of India.[7]
Higher inflation rate also constraints
India's manufacturing environment.
DOMESTIC FACTORS
Developing economies like India have generally a lesser developed financial market which
creates a weak bonding between the interest rates and the aggregate demand. This accounts
for the real money gap that could be determined as the potential determinant for the price rise
and inflation in India. There is a gap in India for both the output and the real money gap. The
supply of money grows rapidly while the supply of goods takes due time which causes
increased inflation. SimilarlyHoarding has been a problem of major concern in India where
onions prices have shot high in the sky. There are several other stances for the gold and
silver commodities and their price hike.[9]
EXTERNAL FACTORS
The exchange rate determination is an important component for the inflationary pressures that
arises in the India. The liberal economic perspective in India affects the domestic markets. As
the prices inUnited States Of America rises it impacts India where the commodities are now
imported at a higher price impacting the price rise. Hence, the nominal exchange rate and the
import inflation are a measures that depict the competitiveness and challenges for the
economy.[10]
VALUE

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The inflation rate in India was recorded at 6.1% (WPI) in August 2013. Historically, from
1969 until 2013, the inflation rate in India averaged 7.7% reaching an all time high of 34.7%
in September 1974 and a record low of -11.3% in May 1976.
The inflation rate for Primary Articles is currently at 9.8% (as of 2012). This breaks down
into a rate 7.3% for Food, 9.6% for Non-Food Agriculturals, and 26.6% for Mining Products.
The inflation rate for Fuel and Power is at 14.0%. Finally, the inflation rate for Manufactured
Articles is currently at 7.3%.[11]

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WHAT IS STOCK MARKET??
A stock market is place or public entity for buying and selling of company shares and
derivatives at an agreed price. These shares and derivatives are listed in stock exchange for
trade.
TYPES OF MARKET IN INDIA
Primarily there are two types of market in India
1) Primary market
2) Secondary market
Primary market- it is the market where stock is issued for the first time. So, when the
company is listed in stock exchange first and issues its shares- this process is happened in
primary market.
Secondary market- These is the market where the already issued stock has traded by the small
investor, AMC and HNI’s through the licensed share broker. After IPO in primary market the
trading has been done in secondary market.
SNO. NAME OF STOCK EXCHANGE ADDRESS
1 Ahemdabad Stock Exchange Ltd
Kamdhenu Complex Opp, Sahajanand College,
Panjarapole, Ambawadi, Ahmedabad - 380001
2 Bse Ltd P J Tower, Dalal Street, Mumbai 400023
3 Calcutta Stock Exchange Ltd 7, Lyons Range, Kolkata – 700001
4 Delhi Stock Exchange Ltd Dse House, 3/1, Asaf Ali Road, New Delhi - 110002
5 Jaipur Stock Exchange
6 MCX- Stock Exchange Ltd
4th Floor, Vibgyor Tower, Plot No C 62, G Block, Bandra
Kurla Complex (BKC), Bandra (E), Mumbai - 400051
7 Madhya Pradesh Stock Exchange Ltd
Palika Plaza, Phase II, 201, 2nd Floor, MTH Compound,
Indore – 452001
8 Madras Stock Exchange Ltd
P O Box No 183, New No: 30 (Old No: 11) Second Line
Beach, Chennai – 600001
9 Magadh Stock Exchange Ltd
10 National Stock Exchange Of India Ltd Bandra Kurla Complex, Bandra (East) Mumbai 400051
11 OTC Exchange Ltd. 92, Maker Towers 'F', Cuffe Parade, Mumbai - 400005

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12 Pune Stock Exchange Ltd
Shivleela Chambers, 752, Sadashiv Peth, Rb Kumthekar
Marg Pune – 411030
13 The Vadodara Stock Exchange Ltd Fortune Tower, Sayajigunj, Vadodara - 390005
14 U.P. Stock Exchange Ltd Padam Towers, 14/113, Civil Lines, Kanpur - 208001
15 United Stock Exchange Of India Ltd
Office No 3 To 6, 7th Floor, Arcadia Building,
195,N.C.P.A Marg, Nariman Point, Mumbai-400021
Some stock exchanges have been granted exit by sebi. These stock exchanges and their date of exits
are:
SNO. NAME OF STOCK EXCHANGE DATE OF EXIT
1 Hyderabad Stock Exchange 25 jan,2013
2 Coimbatore Stock Exchange Ltd 3 april,2013
3 Saurashtra Kutch Stock Exchange Ltd 5 april,2013
4 Mangalore Stock Exchange 3 march,2014
5 Inter-Connected Stock Exchange Of India Ltd 8 december,2014
6 Cochin Stock Exchange Ltd 23 december,2014
7 Bangalore Stock Exchange Ltd 26 december,2014
8 Ludhiana Stock Exchange Ltd 30 december,2014
9 Gauhati Stock Exchange Ltd 27 january,2015
10 Bhubaneswar Stock Exchange Ltd 9 february, 2015
Two main stock exchanges in are:
1) BSE: Bombay stock exchange and
2) NSE National stock exchange
BSE: THE BOMBAY STOCK EXCHANGE
 it is one of the largest stock exchange in with more than 6000 stocks listed
 it account for two third of the total trading volume in the country.
 Established in 1875 and one of the oldest stock exchange in asia.
 It was the first one to be recognized by the government of india among the 22
exchanges.
 Only stock exchange that had the advantage of getting permanent recognition.
 CEO- Ashish Chauhan

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 It possess the maximum number of listed organization in the world.
 Index of BSE is known as SENSEX which include 30 companies.
 SENSEX has been calculated since 1986 and initially it was calculated on the total
market capitalization methodology. This methodology was changed in 2003 to free float
market capitalization.
 SENSEX is calculated for every 15 second
NSE: NATIONAL STOCK EXCHANGE
 It was promoted by leading financial institution at the order of government of india.
 In November,1992 NSE was formed as a tax paying company.
 It was recognized as a stock exchange in april 1993 under the security
contract(regulation) act,1956
 Started its operation in june 1994
 It commenced its capital market segment started in November 1994, while derivative
segment started in june 2000.
What are the effects of Inflation on an economy?
Inflation has both Negative and Positive points which are as follows.
Negative
• Add inefficiencies in the market, and make it difficult for companies to budget or plan long-
term
• Can impose hidden tax increases, as inflated earnings push taxpayers into higher income tax
rates.
• Cost-push inflation - Rising inflation can prompt employees to demand higher wages, to
keep up
with consumer prices. Rising wages in turn can help fuel inflation.
• Hoarding - People buy consumer durables as stores of wealth in the absence of viable
alternatives
as a means of getting rid of excess cash before it is devalued, creating shortages of the
hoarded
objects.
• Hyperinflation - If inflation gets totally out of control (in the upward direction), it can
grossly interfere
with the normal workings of the economy, hurting its ability to supply.
• Price inflation has immense effect on the Time Value of Money (TVM)- The above two

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examples
explains the meaning of this statement.
Positive
• Labor-0market adjustments - Inflation would lower the real wage if nominal wages are kept
constant,
Keynesians argue that some inflation is good for the economy, as it would allow labor
markets to
reach equilibrium faster.
• Debt relief - Debtors who have debts with a fixed nominal rate of interest will see a
reduction in
the "real" interest rate as the inflation rate rises
How does rising inflation affect the stock market?
To tame inflation, the government usually hikes interest rates. This tends to make debt
instruments attractive relative to equities as the former carry a lower risk (small savings
instruments are risk free as they are guaranteed by the government). This results in some
amount of investments shifting from equity to debt.However, high inflation is not always bad
and low inflation need not always be good for equity markets, as the impact will differ for
companies and sectors across different time horizons. The first thing to consider is the items
where prices are rising. For example a rise in oil prices will impact a wide range of items
from food products to those that require transportation.
How are companies affected by rising inflation and how does an investor
view the impact?
A rise in prices of several items means that the input prices for production of various goods
and services are rising. In these cases market analysts and fund managers will always
consider the net impact on the margin of the entity that they are tracking.
While there might be an increase in the input prices, it has to be considered in the backdrop
of the company's ability to pass on the price hike to the end-user. If a company is able to
sustain its profit margin despite high inflation, the stock price is likely to hold. If the high
inflation sustains, at some stage it will lead to a chain reaction across the economy, pushing
up interest rates and even affecting demand. An increase in interest rates will push up
borrowing costs for corporates while lower demand will hurt growth in revenues. This is
likely to impact sentiment for the stock market as a whole.

19
LITERATURE REVIEW
Saurabh Singh, Dr. L.K. tripathy, Kirti Lalwani has done their research on “AN IMPIRICAL
STUDY OF IMPACT OF EXCHANGE RATE & INFLATION RATE ON
PERFORMANCE OF BSE SENSEX”. In their research paper they tries to examine the
primary factors responsible for affecting Bombay Stock Exchange in India. They attempt to
investigate the relative influence of the factor affecting BSE and thereby categorized them.
Douglason G. Omotor has done his research on “RELATIONSHIP BETWEEN
INFLATIOIN AND STOCK MARKET RETURNS” in the context with Nigeria. In his
research Douglason tries to find out the relation of Inflation and stock market in Nigeria. His
research suggest that stock market returns may provide an effective hedge against in Nigeria.
Prof. Lawrence H. Summers has done his research on “INFLATION, THE STOCK
MARKET AND OWNER OCCUPIED HOUSING”. In his research he explained the sharp
decline in the value of the stock market and increase in the price of the owner occupied
housing over the last decade, both of these were result from the interaction of increase in the
expected inflation and US tax system. The result in his research paper indicates that tax
effects are large enough to account for almost the entire relative price shift which has been
observed. His research paper suggest that to a large extent, the increase in the value of
housing, and decrease in the value of corporate capital may have a common explanation, the
interaction of inflation and a non-indexed tax system. The acceleration of inflation has
sharply increased the rate of taxation of corporate capital income, while reducing the
effective taxation of owner occupied housing.
K.R. Shanmugam and Biswa Swarup Mishra has done his research on “STOCK RETURN-
INFLATION IN INDIA”. His study contributes to the stock return-inflation relation literature
in developing countries by revisiting the issue with reference to the emerging economy,
India. More specifically it test whether the Indian stock market provide an effective hedge
against inflation using monthly data on real stock return, inflation and real activity from april
1980 to march 2004 and two step estimation procedure. The result of his study indicate that
(i) the indian stock market reflect the future real activity; (ii) this negative stock inflation
relation emerges from the unexpected component of the inflation and (iii) this negative
relation vanishes when we control for the inflation-real activity relation, thereby support for
Fama’s proxy effect hypothesis.

20
Geert Bekaert and Eric Engstrom has done their research on “INFALTION AND THE
STOCK MARKET:UNDERSTANDING THE ‘FED MODEL’”. The fed model postulate
that the dividend or earning yield on stock equal the yield on nominal treasury bonds, or at
least dividend the two should be highly correlated. They shows that the effect is consistent
with modern asset pricing theory incorporating uncertainty about the real growth prospects
and also habit based risk aversion .
Michael D. Bordo, Michael J. Dueker and David C. Wheelock has done their research on
“INFALTION, MONETARY POLICY AND STOCK MARKET CONDITIONS” His
research papers examines the association between inflation monetary policy and US stock
market condition during the second half of the 20th
century. They use latent variable VAR to
estimate the impact of inflation and other macroeconomics shocks on a latent index of stock
market conditions. They investigate the extent to which various shocks contribute to change
in the market conditions, above and beyond their direct effect on real stock price.

21
RESEARCH OBJECTIVE
The overall objectives in this study are to re-examine the relationship between
inflation and the Indian Stock Market.
The specific objectives of the study are to examine whether expected and
unexpected inflation has significant relationship and influence to Indian stock
market of in the short run and long run for India.
It is well known fact that inflation has impact on stock returns and stock market.
This research identifies that either Inflation has positive or negative relation
with Indian Stock Market.

22
RESEARCH METHODOLOGY
The objective of this research is to find out the relationship between Inflation Rate and Indian
Stock Market because Inflation Rate has a considerable influence on on Stock Market. To
find out the relation we select six indices (BSE Sensex, NSE Nifty, BSE Bankex, Bank Nifty,
BSE Consumer Durables and BSE FMCG). Sensex and Nifty are the major stock indices of
India, if inflation rate affect these stock indices than it affect whole stock market.
The yearly data of Inflation is available from 1958 but data of Sensex and Nifty are not
available for that much longer duration. The inflation data is based on Consumer Price Index
(CPI) and data of all indices is taken on closing date of 31 December every year.
Inflation data is taken from www.Inflation.eu
Data of Stock Indices is taken from BSE (www.bseindia.com), NSE (www.nseindia.com) and
Moneycontrol (www.moneycontrol.com)
The purpose is to check here the degree of association between Inflation and all the indices
mentioned here as to know what kind of relationship exist between and so correlation
analysis is used as it is an appropriate statistical tool for discovering and measuring the
relationship between Inflation and Indian Stock Market
After using correlation analysis, an attempt will be made to find whether we can use the value
of inflation to predict the value of unknown variable which in our case will be the all six
indices used in this research for study. So, here we need to find out what level of variation in
the value of these variables can be explained by a given change in Inflation and the
appropriate tool for it is regression which show the average change in the value of the
dependent variable for a given value of the independent variable.
On obtaining the result through the test done, the significance value was noted, and the
observations were duly noted. In later sections, these observations are then analyzed and
finally the conclusions are drawn on the evidence available and test done on the data
gathered.

23
HYPOTHESIS
As explained in this research methodology, the data has been taken serial wise wherein
inflation is compared against the various indexes to know the nature of relationship between
them
The hypothesis thus stated would be regarding the effectiveness of inflation in our country to
Indian Stock Market. For checking this relationship various stock indexes are selected these
are:-
1) BSE Sensex
2) NSE Nifty
3) BSE Bankex
4) Bank Nifty
5) BSE Consumer Durables
6) BSE FMCG
The reason why we have chosen these variables is because Sensex and Nifty are the major
stock indices used to track Stock Market and Stock Prices, Bankex and Bank Nifty are the
indices to track the performance of banking sector. BSE Consumer Durables is used to track
consumer durables product and BSE FMCG is used to track the performance of FMCG sector
1. Hypothesis- (Yearly Data of Inflation and BSE Sensex)
Ho(Null Hypothesis)-Performance of BSE SENSEX does not depend on performance of
inflation rate
H1(Alternate Hypothesis)- performance of BSE SENSEX depends on performance of
inflation rate
2. Hypothesis- (Yearly Data of Inflation and NSE Nifty)
Ho(Null Hypothesis)- performance of NIFTY does not depends on performance of
Inflation rate.
H1(Alternate Hypothesis)- performance of NIFTY depends on performance of Inflation
rate

24
3. Hypothesis- (Yearly Data of Inflation and BSE Bankex)
Ho(Null Hypothesis) – Performance of BSE Bankex does not depend on the
performance of Inflation Rate.
H1(Alternate Hypothesis)- Performance of BSE Bankex depend on the performance of
Inflation.
4. Hypothesis- (Yearly Data of Inflation and Bank Nifty)
Ho(null Hypothesis)- Performance of Bank Nifty does not depend on the performance of
Inflation Rate.
H1(Alternate Hypothesis)- Performance of Bank Nifty depend on the performance of
Inflation Rate.
5. Hypothesis- (Yearly Data of Inflation and BSE Consumer Durables)
Ho(Null Hypothesis)- Performance of BSE Consumer Durables does not depend on the
H1(Alternate Hypothesis)-Performance of BSE Consumer Durables depend on
6. Hypothesis- (Yearly Data of Inflation and BSE FMCG)
Ho(Null Hypothesis)- Performance of BSE FMCG does not depend on the performance
of Inflation Rate.
H1(alternate Hypothesis)- Performance of BSE FMCG depend on the performance of
Inflation Rate.

25
Observation and Analysis
The observation and analysis has been presented index wise. Therefore, this section shall
briefly details out first on the methodology behind computation of the various variables
discussed and then about the significance of the particular value with respect to the
parameters set.
Relation between Inflation and BSE Sensex
So, In-order to find the relationship between Inflation and BSE Sensex and check reliability
of this research. But before it is officially released, we need to conduct the following test-
Test of correlation between Inflation and BSE Sensex
The purpose of using correlation is because the relationship here is of quantitative in nature
and so it an appropriate statistical tool for discovering and measuring the relationship and
expressing it in a comprehensive manner.
Test of Regression of Inflation on BSE Sensex
The purpose of using regression is to analyze how much “change in BSE Sensex” is
responsible for a given change in Inflation. The purpose of regression is to estimate the value
of unknown variable from the known value of other variable. In our case the known variable
is Inflation and unknown variable is BSE Sensex.

26
Correlation between Inflation and BSE Sensex
Descriptive Statistics
Mean Std. Deviation N
Inflation_Rate 6.9160 3.33938 15
BSE_Sensex 13179.8767 7742.37221 15
Correlations
Inflation_Rate BSE_Sensex
Inflation_Rate
Pearson Correlation 1 .541*
Sig. (2-tailed) .037
N 15 15
BSE_Sensex
Pearson Correlation .541*
1
N 15 15
*. Correlation is significant at the 0.05 level (2-tailed).
Observations
 The level of significance is 0.037 which is less than 5% and so we can say that the
level of correlation between inflation and BSE Sensex is significant and also the
Pearson Correlation value of “0.541” shows that there is a strong degree of positive
correlation between Inflation and BSE Sensex
 There is a positive correlation between them, it signifies increase in inflation rate
always give positive impact on BSE Sensex

27
Regression between inflation and BSE Sensex
Variables Entered/Removeda
Model Variables
Entered
Variables
Removed
Method
1 Inflation_Rate
b
. Enter
a. Dependent Variable: BSE_Sensex
b. All requested variables entered.
Model Summary
Model R R Square Adjusted R
Square
Std. Error of the
Estimate
1 .541
a
.293 .239 6754.78031
a. Predictors: (Constant), Inflation_Rate
ANOVA
a
Model Sum of Squares df Mean Square F Sig.
1
Regression 246068843.705 1 246068843.705 5.393 .037
b
Residual 593151741.429 13 45627057.033
Total 839220585.134 14
b. Predictors: (Constant), Inflation_Rate
Coefficientsa
Model Unstandardized Coefficients Standardized
Coefficients
t Sig.
B Std. Error Beta
1
(Constant) 4497.196 4125.617 1.090 .295
Inflation_Rate 1255.448 540.607 .541 2.322 .037
Observation
Regression equation is as follows

BSE Sensex=4497+1255.448(Inflation Rate)
Inflation Rate is Independent Variable
BSE Sensex
And 4497.196 is the intercept
BSE Sensex


BSE Sensex
And now coming to the analysis part, the level of significance 0.037 which is less
than 5% significance level
value of “0.293” shows that 29.3% vari
explained by a given change in Inflation Rate.
BSE Sensex
BSE Sensex is dependent variable
is dependent variable
than 5% significance level and so we can say that the model is fit and also the R
and so we can say that the model is fit and also the R
28
BSE Sensex=4497+1255.448(Inflation Rate) where,
value of “0.293” shows that 29.3% variation in the value of BSE Sensex can be
28
where,
ation in the value of BSE Sensex can be
where,
and so we can say that the model is fit and also the R2

29
Relation between Inflation and CNX Nifty
So, In-order to find the relationship between Inflation and BSE CNX Nifty and check
reliability of this research. But before it is officially released, we need to conduct the
following test-
Test of correlation between Inflation and CNX Nifty
Test of Regression of Inflation on CNX Nifty
The purpose of using regression is to analyze how much “change in CNX Nifty” is
is Inflation and unknown variable is CNX Nifty.

30
Correlation between inflation and CNX Nifty
CNX_Nifty 3981.9133 2290.34539 15
Correlations
Inflation_Rate CNX_Nifty
Inflation_Rate
Pearson Correlation 1 .536*
N 15 15
CNX_Nifty
Pearson Correlation .536*
1
N 15 15
*. Correlation is significant at the 0.05 level (2-tailed).
Observations
 The level of significance is 0.039 which is less than 5% and so we can say that the
level of correlation between inflation and CNX Nifty is significant and also the
correlation between Inflation and CNX Nifty.
always give positive impact on CNX Nifty.

31
Regression between Inflation and CNX Nifty
Model Variables
Entered
Variables
Removed
Method
1 Inflation_Rateb
. Enter
a. Dependent Variable: CNX_Nifty
Model Summary
Square
Std. Error of the
Estimate
1 .536a
.287 .232 2006.73572
ANOVAa
1
Regression 21088700.571 1 21088700.571 5.237 .039b
Residual 52350847.271 13 4026988.252
Total 73439547.842 14
Coefficientsa
Coefficients
t Sig.
B Std. Error Beta
1
(Constant) 1440.061 1225.654 1.175 .261
Inflation_Rate 367.532 160.606 .536 2.288 .039
Observation
CNX Nifty=1440.061+367.532(Inflation Rate) where,

CNX Nifty
And
CNX Nifty
And 1440.061

CNX Nifty
1440.061
And now coming to the analysis part,
value of “
CNX Nifty
1440.061
value of “
1440.061
value of “
is the intercept
value of “0.287
is the intercept
0.287
is the intercept
0.287”
is the intercept
” shows that 28.7
is the intercept
shows that 28.7
is the intercept
shows that 28.7
shows that 28.7
shows that 28.7
shows that 28.7% vari
% vari
32
And now coming to the analysis part, the level of significance 0.039
% variation in the value of CNX Nifty
32
the level of significance 0.039
ation in the value of CNX Nifty
the level of significance 0.039 which is less
which is less
ation in the value of CNX Nifty can be
which is less
can be
which is less
can be
which is less
than 5% significance level and so we can say that the model is fit and also the R2
can be
which is less

33
Relation between Inflation and BSE Bankex
So, In-order to find the relationship between Inflation and BSE Bankex and check reliability
of this research. But before it is officially released, we need to conduct the following test-
Test of correlation between Inflation and BSE Bankex
Test of Regression of Inflation on BSE Bankex
The purpose of using regression is to analyze how much “change in BSE Bankex” is
is Inflation and unknown variable is BSE Bankex.

34
Correlation between inflation and BSE Bankex
BSE_Bankex 9744.1625 5369.57479 12
Correlations
Inflation_Rate BSE_Bankex
Inflation_Rate
Pearson Correlation 1 .308
N 12 12
BSE_Bankex
Pearson Correlation .308 1
N 12 12
Observations
 The level of significance is 0.330 which is more than 5% and so we can say that the
level of correlation between inflation and BSE Bankex is not significant and also the
correlation between Inflation and BSE Bankex.
always give positive impact on BSE Bankex.

35
Regression between Inflation And BSE Bankex
Model Variables
Entered
Variables
Removed
Method
1 Inflation_Rateb
. Enter
a. Dependent Variable: BSE_Bankex
Model Summary
Square
Std. Error of the
Estimate
1 .308a
.095 .005 5357.32616
ANOVAa
Model Sum of Squares Df Mean Square F Sig.
1
Regression 30146230.922 1 30146230.922 1.050 .330b
Residual 287009436.173 10 28700943.617
Total 317155667.095 11
Coefficientsa
Coefficients
T Sig.
B Std. Error Beta
1
(Constant) 5918.551 4040.469 1.465 .174
Inflation_Rate 499.536 487.414 .308 1.025 .330
Observation
BSE Bankex =5918.551+499.536(Inflation Rate) where,

BSE Bankex
And 5918.551
BSE Bankex
And 5918.551

BSE Bankex
And 5918.551
And now coming to
than 5% significance level and so we can say that the model
value of “0.095” shows that 9.5
explained by a given change
BSE Bankex
And 5918.551
And now coming to
BSE Bankex is dependent variable
And 5918.551
And now coming to
is the intercept
And now coming to
is the intercept
And now coming to
is the intercept
And now coming to
is the intercept
And now coming to
is the intercept
is the intercept
the analysis part,
the analysis part,
the analysis part,
the analysis part,
in Inflation Rate.
the analysis part,
% vari
in Inflation Rate.
36
the analysis part, the level of significance 0.330 which is more
% variation in the value of BSE Bankex
in Inflation Rate.
36
the level of significance 0.330 which is more
ation in the value of BSE Bankex
in Inflation Rate.
in Inflation Rate.
in Inflation Rate.
than 5% significance level and so we can say that the model is not
is not
is not
fit and also the R
fit and also the R
ation in the value of BSE Bankex can be
fit and also the R
can be
fit and also the R
can be
fit and also the R
can be
fit and also the R22

37
Relation between Inflation and Bank Nifty
So, In-order to find the relationship between Inflation and Bank Nifty and check reliability of
this research. But before it is officially released, we need to conduct the following test-
Test of correlation between Inflation and Bank Nifty
Test of Regression of Inflation on Bank Nifty
The purpose of using regression is to analyze how much “change in Bank Nifty” is
is Inflation and unknown variable is Bank Nifty.

38
Correlation between Inflation and Bank Nifty
Bank_Nifty 9679.3700 4248.23609 10
Correlations
Inflation_Rate Bank_Nifty
Inflation_Rate
N 10 10
Bank_Nifty
N 10 10
Observations
level of correlation between inflation and Bank Nifty is not significant and also the
Pearson Correlation value of “0.018” shows that there is a very weak positive or no
correlation between Inflation and Bank Nifty.
 There is a very weak positive correlation between inflation rate and Bank Nifty.

39
Regression of Inflation and Bank Nifty
Model Variables
Entered
Variables
Removed
Method
1 Inflation_Rateb
. Enter
a. Dependent Variable: Bank_Nifty
Model Summary
Square
Std. Error of the
Estimate
1 .018a
.000 -.125 4505.24129
ANOVAa
Model Sum of Squares Df Mean Square F Sig.
1
Regression 49996.196 1 49996.196 .002 .962b
Residual 162377592.365 8 20297199.046
Total 162427588.561 9
Coefficientsa
Coefficients
T Sig.
B Std. Error Beta
1
(Constant) 9473.643 4383.152 2.161 .063
Inflation_Rate 24.375 491.132 .018 .050 .962
Observation
Bank Nifty=9473.643+24.375(Inflation Rate) where,

Bank Nifty
And 9473.643
Bank Nifty
And 9473.643

Bank Nifty
And 9473.643
And now coming to the analysis par
than 5% significance level and so we can say that the model is
value of “0.00
by a given change in Inflation Rate.
Bank Nifty
And 9473.643
value of “0.00
And 9473.643
value of “0.00
is the intercept
value of “0.00
is the intercept
value of “0.00
is the intercept
value of “0.00” sh
is the intercept
” shows that 0
is the intercept
ows that 0
is the intercept
ows that 0
ows that 0
ows that 0% var
% var
And now coming to the analysis part, the level of significance 0.
% variation in the value of Bank Nifty
40
t, the level of significance 0.
ation in the value of Bank Nifty
40
t, the level of significance 0.962 which is more
not
62 which is more
fit and also the R
ation in the value of Bank Nifty can be explained
62 which is more
fit and also the R
can be explained
62 which is more
fit and also the R
can be explained
62 which is more
fit and also the R
can be explained
62 which is more
fit and also the R
can be explained
62 which is more
fit and also the R2
can be explained
2
can be explained

41
Relation between Inflation and BSE FMCG
So, In-order to find the relationship between Inflation and BSE FMCG and check reliability
of this research. But before it is officially released, we need to conduct the following test.
Test of correlation between Inflation and BSE FMCG
Test of Regression of Inflation on BSE FMCG
The purpose of using regression is to analyze how much “change in BSE FMCG” is
is Inflation and unknown variable is BSE FMCG.

42
Correlation of Inflation and BSE FMCG
BSE_FMCG 2906.8767 2237.59334 15
Correlations
BSE_FMCG Inflation_Rate
BSE_FMCG
N 15 15
Inflation_Rate
N 15 15
Observations
 The level of significance is 0.102 which is more than 5% and near to 10% so we can
say that the level of correlation between inflation and BSE FMCG is moderately
significant and also the Pearson Correlation value of “0.439” shows that there is a
strong degree of positive correlation between Inflation and BSE FMCG.
always give positive impact on BSE FMCG.

43
Regression between inflation and BSE FMCG
Model Variables
Entered
Variables
Removed
Method
1 Inflation_Rateb
. Enter
a. Dependent Variable: BSE_FMCG
Model Summary
Square
Std. Error of the
Estimate
1 .439a
.192 .130 2086.82921
ANOVAa
1
Regression 13482405.184 1 13482405.184 3.096 .102b
Residual 56613129.937 13 4354856.149
Total 70095535.121 14
Coefficientsa
Coefficients
T Sig.
B Std. Error Beta
1
(Constant) 874.477 1274.573 .686 .505
Inflation_Rate 293.869 167.016 .439 1.760 .102
Observation
BSE FMCG=874.477+293.869(Inflation Rate) where,
BSE FMCG is dependent variable

And 874.477And 874.477

And 874.477
than 5%
moderately
value of BSE FMCG
And 874.477
than 5%
moderately
value of BSE FMCG
than 5%
moderately
value of BSE FMCG
is the intercept
than 5% but near to 10%
moderately
value of BSE FMCG
is the intercept
but near to 10%
moderately fi
value of BSE FMCG
is the intercept
but near to 10%
fit and also the R
value of BSE FMCG
is the intercept
but near to 10%
t and also the R
value of BSE FMCG
is the intercept
but near to 10%
t and also the R
value of BSE FMCG can be explained by a given change in Inflation Rate.
but near to 10%
t and also the R
can be explained by a given change in Inflation Rate.
but near to 10% significance level and so we can say that the model is
t and also the R
significance level and so we can say that the model is
t and also the R2
value of “0.192
value of “0.192
value of “0.192
44
value of “0.192
44
value of “0.192
value of “0.192” shows that
” shows that
” shows that
” shows that
” shows that
” shows that 19.2
19.2% vari
% vari
102 which is
% vari
which is
% variation in the
which is
ation in the
which is more
ation in the
more
ation in the
more
ation in the

45
Relation between Inflation and BSE Consumer Durables
So, In-order to find the relationship between Inflation and BSE Consumer Durables and
check reliability of this research. But before it is officially released, we need to conduct the
following test-
Test of correlation between Inflation and BSE Consumer Durables
Test of Regression of Inflation on BSE Consumer Durables
The purpose of using regression is to analyze how much “change in BSE Consumer
Durables” is responsible for a given change in Inflation. The purpose of regression is to
estimate the value of unknown variable from the known value of other variable. In our case
the known variable is Inflation and unknown variable is BSE Consumer Durables.

46
Correlation between Inflation and BSE Consumer Durables
BSE_Consumer_Durables 3968.6273 2866.36055 15
Correlations
Inflation_Rate BSE_Consumer
_Durables
Inflation_Rate
N 15 15
BSE_Consumer_Durables
N 15 15
Observations
level of correlation between inflation and BSE Consumer Durables is not significant
and also the Pearson Correlation value of “0.400” shows that there is a moderate
degree of positive correlation between Inflation and BSE Consumer Durables.
always give positive impact on BSE Consumer Durables.

47
Regression between Inflation and BSE Consumer Durables
Model Variables
Entered
Variables
Removed
Method
1 Inflation_Rateb
. Enter
a. Dependent Variable: BSE_Consumer_Durables
Model Summary
Square
Std. Error of the
Estimate
1 .400a
.160 .095 2726.26034
ANOVAa
1
Regression 18401878.581 1 18401878.581 2.476 .140b
Residual 96622440.766 13 7432495.444
Total 115024319.347 14
Coefficientsa
Coefficients
T Sig.
B Std. Error Beta
1
(Constant) 1594.213 1665.118 .957 .356
Inflation_Rate 343.322 218.192 .400 1.573 .140
Observation
BSE Consumer Durables= 1594.213+343.322(Inflation Rate) where,
BSE Consumer Durables is dependent variable

And 1594.213And 1594.213

And 1594.213
value of “0.160” shows that 16
And 1594.213
And 1594.213
is the intercept
is the intercept
is the intercept
is the intercept
is the intercept
is the intercept
value of “0.160” shows that 16% vari
% vari
% vari
48
% variation in the value of BSE Consumer Durables
48
ation in the value of BSE Consumer Durables
not
the level of significance 0.140 which is
fit and also the R
which is
fit and also the R
which is
fit and also the R
which is more
fit and also the R
more
fit and also the R
more
fit and also the R2
2

49
FINAL OBSERVATION AND CONCLUSION
So, on the basis of the result of both the test i.e. Test of Correlation and Test of Regression
conducted above, we could make out that-
The correlation coefficient of Inflation with major stock indices is sometimes highly
positively or sometimes very low positive. This show the degree of association between
Inflation and Various Stock Market Indices is very uncertain and random and hence stock
market return cannot be predicted. So, by using above statements we can safely conclude that
stock market prices follow a random walk such that outperforming the stock market is not
possible
The regression coefficient of Inflation with major stock market indices is always positive.
This shows that inflation can be used to explain the variation in the movement of the the
stock market and hence Indian Stock Market can be affected by the change in the inflation
rate in Indian economy.
So, in the light of the all observation in all the above cases the results are:
1) In HYPTHESIS 1 Null hypothesis is rejected and Alternate hypothesis is accepted.
So, it signifies that there is significant relationship between inflation and BSE Sensex,
which means that increase or decrease in inflation will increase or decrease the
Sensex.
2) In HYPOTHESIS 2 Null hypothesis is rejected and Alternate hypothesis is accepted
So, it signifies that there is significant relationship between Inflation and CNX Nifty,
which means that increase or decrease in Inflation Rate will increase or decrease Nifty
BSE Sensex and CNX Nifty are the two major indices of Indian Stock Market which
represent the behavior of overall Stock market in India. Inflation affect these two
stock indices which means that inflation affect Indian Stock Market. So objective of
this study has been satisfied by these results.
But to get on concrete result we check 4 more indices BSE Bankex, Bank Nifty, BSE
Consumer Durables and BSE FMCG
3) In HYPOTHESIS 3 Null hypothesis is accepted and Alternate hypothesis is rejected.
So It signifies that there is no signification relationship between Inflation and BSE
Bankex

50
4) In HYPOTHESIS 4 Null hypothesis is accepted and Alternate hypothesis is rejected.
So, it signifies that there is no significant relationship between Inflation and Bank
Nifty.
5) In HYPOTHESIS 5 Null Hypothesis is accepted and alternate hypothesis is rejected
which means that there is no significant relationship between Inflation and BSE
FMCG.
6) In HYPOTHESIS 6 Null hypothesis is rejected and Alternate hypothesis is accepted.
So it signifies that there is significant relationship but moderately significant
relationship between Inflation and BSE Consumer Durables.
The purpose of study was to find out the effectiveness, Impact and relationship of Inflation
with the Indian Stock Market and to uncover the impact of inflation on Stock Market. There
were many objectives behind conducting the study but the main objective was to find out the
nature of relationship that Indian Stock Market has with Inflation because inflation has
considerable influence on economy and Stock Market
The project was begin with an extensive introduction about the inflation, stock market and
how inflation affect stock market and economy. In this research the data were taken on yearly
basis. The inflation data is taken on annual basis according to CPI (Consumer Price Index).
The data of all the indices also taken on annual basis, the data of index is taken on closing
price for all years.
The final result goes in favor of the study that Inflation has relationship with Indian Stock
Market because Inflation shows a positive effect on most of the indices. So, the end result is
that Inflation always leave positive impact on Indian Stock Market

Project report on Relationship Of Inflation with Indian Stock Market

Project report on Relationship Of Inflation with Indian Stock Market

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Project report on Relationship Of Inflation with Indian Stock Market