Significance of GDP and Population Growth in Shaping the Indian Stock Market: A Case Study of BSE Index

Various factors impact the stock market. Among them, gross domestic product and population growth are the significant variables. This research paper focuses on how GDP and population growth affect the Indian stock market. This study aims to examine the association between real GDP, population growth, and the performance of the Indian stock market. This research’s findings, which explore the impact of GDP and population growth on volatility between the Bombay Stock Exchange (BSE) and macroeconomic variables, are crucial for shaping investment plans. The analysis utilizes a multiple regression equation model to examine how these factors interact. The data collected consists of annual records of Real GDP and the population growth rate from 1996 to 2023. The result shows a strong positive correlation between GDP and the BSE index. Similarly, population growth and the BSE index have a strong negative correlation. The regression model provides a significant impact of independent variables on the BSE index, where the independent variables explain a 96.62% variation in the BSE Index. Also, BSE increases by 84.49% with a one percentage point GDP growth, whereas a one percentage increase in population growth results in a 102.04% decrease in BSE. The study found that the macroeconomic variables GDP and population growth used in regression analysis are suitable explanatory variables. The regression model constructed in this study is essential in explaining the relationship between the dependent and independent variables. However, the current research employs only two explanatory variables to analyze stock prices. Therefore, there is an opportunity for further examination to elucidate how these additional explanatory variables impact stock prices. This study opens the door for future research to explore the influence of other macroeconomic variables on the Indian stock market. The research findings help the concerned stakeholders make policy aware of them in the investment plans, providing a solid bedrock for decision-making in the volatile stock market.