Loading article...
Loading article...
Stream/Area:
-
Subject:
-
Paper ID:
IJSREM53476
Volume:
9 |
11 |
Nov 2025
Pages:
1-10
Publication Frequency:
Monthly (12 issues per year)
License:International Journal of Scientific Research in Engineering and Management follows the Creative Commons Attribution 4.0 (CC BY 4.0) License, allowing free use and distribution with proper attribution.
ECONOMICS
GOVERNMENT DEGREE COLLEGE
This study examines the relationship between the performance of India's benchmark stock index, the Nifty 50, and the country's economic growth and macroeconomic stability over 2000–2025. Annual data on Nifty 50 closing values are combined with World Bank data on real GDP growth, consumer price inflation, the rupee–dollar exchange rate, foreign exchange reserves and foreign direct investment. The analysis uses descriptive and sub-period statistics, Pearson correlations, Augmented Dickey–Fuller unit root tests, multiple regression with heteroscedasticity-robust standard errors and a full set of diagnostic tests, Granger causality tests, and Engle–Granger cointegration with an error correction model. The Nifty 50 rose from 1,263.55 at the end of 2000 to 25,129.60 at the end of 2025, a compound annual growth rate of 12.9 per cent, but with high volatility (standard deviation of annual returns of 27.6 per cent). The results show a strong long-run relationship: the Nifty 50 and real output are cointegrated, with a long-run elasticity of about 1.96, and about 72 per cent of any deviation from this equilibrium is corrected within a year. In the short run, however, annual stock returns are not significantly related to GDP growth. The macroeconomic variable most closely linked to returns is the growth of foreign exchange reserves (r = 0.48), which proxies foreign capital inflows; it is the only significant regressor at the 5 per cent level in a model that explains 46 per cent of the variation in returns. Granger tests show that stock returns lead rupee movements, but there is no short-run causality between returns and growth in either direction. The study concludes that the Nifty 50 reflects India's long-run growth story but that its year-to-year movements are driven mainly by capital flows and external stability, with implications for investors and policymakers.
KEYWORDS
This paper finds that the Nifty 50 and India's economy are closely linked in the long run but loosely linked in the short run. Over 2000–2025 the index has tracked and amplified the country's growth, rising about twice as fast as real output and returning to this path after major shocks. From year to year, however, returns are driven mainly by capital flows and external stability rather than by GDP growth. For India to sustain both strong growth and a stable, deep stock market, continued emphasis on macroeconomic stability, low inflation, strong reserves and broad-based domestic participation in equity markets will be essential.
Chen, N.-F., Roll, R., & Ross, S. A. (1986). Economic forces and the stock market. Journal of Business, 59(3), 383–403. Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association, 74(366), 427–431. Engle, R. F., & Granger, C. W. J. (1987). Co-integration and error correction: Representation, estimation, and testing. Econometrica, 55(2), 251–276. Fama, E. F. (1981). Stock returns, real activity, inflation, and money. American Economic Review, 71(4), 545–565. Granger, C. W. J. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica, 37(3), 424–438. Levine, R., & Zervos, S. (1998). Stock markets, banks, and economic growth. American Economic Review, 88(3), 537–558. MacKinnon, J. G. (2010). Critical values for cointegration tests. Queen's Economics Department Working Paper No. 1227. National Stock Exchange of India. Nifty 50 index historical data. https://www.nseindia.com Reserve Bank of India. Handbook of Statistics on the Indian Economy (various issues). White, H. (1980). A heteroskedasticity-consistent covariance matrix estimator and a direct test for heteroskedasticity. Econometrica, 48(4), 817–838. Wikipedia (2025). NIFTY 50: Annual returns. https://en.wikipedia.org/wiki/NIFTY_50 (closing values cross-checked for consistency). World Bank (2025). World Development Indicators: India (NY.GDP.MKTP.KD.ZG, FP.CPI.TOTL.ZG, PA.NUS.FCRF, FI.RES.TOTL.CD, BX.KLT.DINV.WD.GD.ZS). https://data.worldbank.org
Publication Date
11/27/2025
Peer Review Type
Double-Blind Peer Review
Review Rounds: 2
Documents
Article Views
0
Total views since publication
PDF Downloads
1
Total downloads since publication
Geographic Reach
5
Digital Preservation: This article is permanently archived on Zenodo and complies with all data preservation standards across major indexing platforms.
Plagiarism Screening
This manuscript has been checked for plagiarism using TurnitinPlagiarismChecker software.
Conflict of Interest
The authors declare no conflict of interest related to this research work.
Funding Information
No funding information available for this research.
Related research in the same subject area
Loading similar articles...