The Relationship Between Macro And Micro Economic Variables Finance Essay

The nature of the relationship between Macro and Micro economic variables and the motion of Sensex related to the economic variables is the chief focal point of the survey. The continuance of the survey is from December 2009 to January 22nd 2010. Foreign direct investing, money supply, export market, industrial production index are some of the key variables which are analyzed as portion of this survey. This survey besides highlights the bing relationship between stock market and macro economic factors, with regard to long and short tally of the economic system. It is really apparent from the survey, that the Indian stock market is driven chiefly by the possible and existent public presentation of the economic system.

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Introduction

Stock monetary values and their motions are extremely sensitive and most of them are driven by the alteration in economic variables adding to that is the outlook about the hereafter chances. Expectations are influenced to a great extent by the micro and macro economic cardinal analysis, this is formed either logically or realistically and besides many unknown factors which are non at all predictable and quantifiable. The domestic economic basicss play a really critical function in the motion of Sensex. Indian economic system to an extent is closely incorporate with planetary economic systems, because of which many of the domestic economic alterations and determinations are influenced due to the planetary economic alterations. Interest rate, exchange rate and planetary stock monetary value alterations are some of the cardinal external factors which can act upon the Sensex motion.

One of the recent illustrations related to US subprime crisis has drastically impacted the motion of foreign exchange financess. Other celebrated illustration is the grasp of Indian rupee against dollar which created a major cause of concern for export oriented companies. IT industries and fabric industries are true illustrations for this. Stock monetary value motions are besides influenced by grasp of India Rupee.

The securities market does hold a important relationship with the existent and fiscal sector of the economic system. There are two ways for analysing the relationship first one is to see stock market as a taking market index and the other one is the impact of stock market due to the economic factors of the state. It is really of import in the country of finance and investing to hold the intense cognition about the sensitiveness of stock market due to macro economic analysis.

The followers are the Macro Economic Factors that can make an impact on Sensex. Impact can be positive and negative.

Global Market Motions

Economic Growth of the state

Industrial Growth of the state

Inflation

Interest Ratess

Crude Oil Monetary values

Stability of Government

Rupee Appreciation

The followers are the Micro Economic Factors that can make an impact on Sensex. Impact can be positive and negative Profitableness of the companies

Market Uncertainties

Stockholders Expectations ( Both Positive and Negative Expectations will hold an impact )

Demand Supply of Shares

My full survey was go arounding in and around the Macro and Micro analysis of the economic system. Future anticipations in the 5 hebdomad diaries are made by sing the factors of economic system to the best of my cognition.

Journal Review

Week 1

7th December 2009

Prediction – Sensex Up by 100 Points

Actual – Start of the Day – Addition by 5.2 points and closed the twenty-four hours with a diminution of 123.6 Points.

Findingss

One of the cardinal findings of this hebdomad was the recovery of U.S. economic system as the unemployment rate beads ; this is decidedly a encouragement to the universe economic system which is still under recovery stage. In add-on, occupation losingss were revised down by a sum of 159,000 for the month of September and October.Recovery of US Economy was further concreted by this statistics. The stocks in U.S. and European reacted positively on the US informations. But subsequently the U.S. market drew back somewhat. In US Stock Indexes there of the major portions have ended much higher and investors The three major U.S. stock indexes ended higher, but subsequently went down as investors started holding the uncertainness over the possible discouraging impact of higher rates. From Sensex point of position, it boosts the assurance of the investors in the market and there are clear marks of recovery, this could be one of the cardinal grounds why the Sensex opened the twenty-four hours positively.

From an India point of position Mahindra Satyam winning 100 crore contract from Airbus and Wall Mart has opted Infosys to be one of the three IT sellers for $ 600 million multi-year contracts added more enthusiasm in the heads of investors to put in the IT Sector of the state. This has shown an addition in the portions of Infosys and Mahindra Satyam. On 7th December the twenty-four hours ended with the diminution of 127 points.

My anticipation was right every bit far as the beggary of the trading twenty-four hours was concerned but at the terminal of the twenty-four hours the market closed with a diminution.

Week 2

14th December 2009

Prediction – Sensex down by 100 Points

Actual – Start of the Day – lessening by.89 points and closed the twenty-four hours with a diminution of 20.59 Points

Findingss

The twenty-four hours started as I have predicted, one of the cardinal observations that I had was the higher rate of rising prices that was reported by the media, and harmonizing to me this would hold had an inauspicious impact on the gap of twenty-four hours.

To add assurance to investors there was a statement from World Bank head about the Dubai crisis. The World Bank head has mentioned that the crisis is non so large and it is manageable.Even though the Indian Economy was non significantly impacted, there were small dorks in the Stock Market when Dubai debt crisis was made public. This would besides hold added more assurance in investors mind. As per HDFC, the private portion of UAE will be near to 12 % ; this crisis is at the clip when the state is already anticipating a diminution in the private transportation. This will add more force per unit area to the private transportation this twelvemonth. World Bank has estimated a diminution of 9 % diminution in the private transportation from the part in nominal dollar footings this twelvemonth

Another, of import intelligence was the. Reliance command for insolvent Lyondell Basel would hold besides invoked wonder among investors. This intelligence came out after US tribunal proclaims a revised deliverance program. On 14th December the twenty-four hours ended with the diminution of 20.59 points.

Week 3

21st December 2009

Prediction – Sensex Up by 10 Points

Actual – Start of the Day – Addition by 5.04 points and closed the twenty-four hours with a diminution of 123.64 Points

Findingss

Harmonizing to me there were 3 key points which triggered the rise of Sensex points. The first 1 was related to the strengthened of rupee which highlights the fast economic growing and the rise in stocks which will pull foreign investing.

The 2nd 1 was the payment of 10 billion US dollar by Abu Dhabi to Dubai to refund the 4.1 billion US dollar Islamic bond. Even though the Dubai crisis has really small impact on the economic system ; similar promoting intelligence has created more assurance in the heads of investors.

The 3rd one will be Festival Season gain- Christmas Shopping Dalal Street was on a jubilation temper on the Christmas-eve. Led by InfoTech portions, the benchmark Sensex surged by 692 points, or 3.61 per cent, to 19,854.12 on strong planetary cues. Investor assurance revived across the universe after informations on US Consumption and a positive motion in Wall Street. Some of the concerns sing the US economic system were put to rest after the proclamation of positive statistics.

On 21st December the Market started in a positive mode as per my anticipation but subsequently, the twenty-four hours was closed with a diminution of 123.64 points.

Week 4

11th January 2009

Prediction – Sensex up by 10 Points

Actual – Start of the Day – Addition by 184.3 points and closed the twenty-four hours with a diminution of 197.88 Points

Findingss

This was the hebdomad where the Sensex went over and above than what was expected. They were non any interrupting intelligence with regard to any of the cardinal sectors in the state that could hold perchance triggered such as encouragement at the start of the twenty-four hours. However there were few findings from my side which could hold triggered the Sensex rise. In 2010 the Sensex is likely to widen its mass meeting from 2009. One of the cardinal factors that worry investors is the backdown of stimulus steps and weak monsoon of this twelvemonth. These two could perchance halter the stock market upward motion but the beginning of the twelvemonth was on a positive note.

The 2nd observation from my side is that of Bharti Airtel has got a go in front from Bangladesh for an initial investing of $ 300 Million in Warid Telecom which is operated from Bangladesh. This coup d’etat will assist Bharti to come in into the Bangladesh Telecom market, which is considered as one of the rapid turning telecom market.

On 11th January the Market started in a positive mode as per my anticipation but subsequently, the twenty-four hours was closed with a diminution of 197.88 points.

Week 5

18th January 2009

Prediction – Sensex up by 10 Points

Actual – Start of the Day – lessening by 15.58 points and closed the twenty-four hours with a addition

Of 102.36 Points

Wipro Limited be aftering to establish a sponsored American Depository Receipts ( ADR ) was my first stake on for a kick start. This offering means there will be a batch of offloading of the interest by the boosters as they will be able to sell the portions at a premium in US market. This intelligence triggered a 10 twelvemonth high of Wipro portions The 2nd of import intelligence was the industrial production growing reported at 11.7 personal computer which will set India into the path of accomplishing 8 personal computer domestic growing in the current fiscal twelvemonth.

Another observation is that of Reliance Capital of Anil Ambanis is be aftering to deviate 20 % of the interest in its common fund flying the Reliance Asset Management Company to a strategic spouse in oversees. This will assist the company to make more of planetary market.

It seems the market to be in a amalgamate stage and planning to interrupt out. The two events which could possible do the market move frontward will be the RBI policy ; analysts are anticipating some tough stance from RBI. But as per experts it is really improbable, as some conclude 0.25 to 0.50 footing point of CRR hiking is the maximal that we can anticipate. Another cardinal point to see is the mass meeting that is traveling on in PSU banking sector. This could possible trip the stock motion upwards in the approaching yearss of the hebdomad.

There were two of import intelligence related to Indian IT industry, the first 1 was that India ‘s top 3 confer withing Companies ( TCS, Wipro and Infosys ) are be aftering to engage more people as there are more US Off shoring work coming its manner to India as the US economic system get downing to retrieve. The 2nd 1 was the Q3 consequence of Wipro which is more than the market prognosis, and besides the Wipro direction confirms the starting of the outsourcing resurgence.

Even after batch of positive vibration, the market reacted in an opposite manner than what I have predicted. The twenty-four hours opened with a diminution of 15.58 points and closed with a positive figure. There was an addition of 102.36 points at the clip of closing.

Decision

There are 30 companies listed in Sensex. The growing rate of existent economic sectors will hold a direct impact in the motion of stock monetary value. Another observation of mine is that higher demand of stock is straight related to the positive growing outlooks. Higher rate of Foreign Direct investings are fluxing to India due to the outlooks of higher return from India compared to other developed and developing states, this is one of illustration which proves my above observation. Another factor which I have observed is that the motion of stock monetary value seems to hold an impact on export flows into the state perchance because of the consequence of exchange rate. One thing for certain, motion in Sensex and Nifty can do alterations in the exchange rate in short tally. One of the cardinal illations that can be drawn from this survey is that the stock market motion in India is chiefly driven by the domestic public presentation of the market instead than the export market.

Another of import Observation that I have is the direct relationship between money supply and stock monetary value. Any alterations in the money supply have of import direct and indirect affect on the existent economic activity which in bend helps to make up one’s mind the stock monetary values. It is to be noted that money supply will non hold any impact on the stock indexes but involvement rate is the 1 which will hold a direct impact on the stock indexes. Further it can be concluded that pecuniary policies which will impact the involvement rate are the critical information which influences the stock market in India

Self Appraisal:

What are the undertakings that are required to be covered in this assignment?

The nature of the relationship between Macro and Micro economic variables and the motion of Sensex related to the economic variables is the chief focal point of the survey. The continuance of the survey is from December 2009 to January 22nd 2010. “ A ” is the class that I will delegate for this subdivision.

Do you believe the assignment has acknowledged all the of import analysis related to Sensex?

All the cardinal factors which can potentially hold an impact on the Sensex motion have been considered. I would rate “ B ” for this subdivision

Is this your Original Work? Is this assignment free from Plagiarism?

This is my original work. I have referred assorted web sites which gave me penetration on the latest concern intelligence. Weekly Predications is strictly based on the economical and political factors of the state. “ Turn it in ” reported attached for your mention. I will rate this as “ A ”

Is this assignment as per APA Referencing proposed by ECU?

Yes, I have followed APA citing to run into ECU criterions. “ B ” will be my evaluation for this.

Have you checked this study for spelling mistakes and grammatical errors?

The whole study is exhaustively checked to avoid and spelling or grammatical error. And I would rate this an ‘ A ‘ .

Did the factors that have influenced the market have been clearly identified?

I have tried my best to understand the economic Oregons that can hold a possible influence on the Sensex motion. Further to the analysis it was apparent that there are batch of “ unknown ” facts or instead persecutions or premises that drive the market. I have captured whatever I felt that is relevant for this survey and the same is highlighted in each hebdomad ‘s diary. I would rate this as B.

The information that you have provided in the study is after analyzing the information signifier dependable beginning or it is merely a listing of information?

I have analysed the information that was available to me and based on the information I have forecasted the Sensex and I guarantee all the information that is published in the study is merely after analysis. I would rate rate A

Was your Predictions Right? Has this been highlighted in the Report.

Detailss related to my postulation and the existent information is published in the study. All the economical and political factors are considered for my anticipations form dependable beginning. The information that was collected on a hebdomadal footing is highlighted in each hebdomad ‘s diary which gives grounds for my analysis and anticipations. ” A ” will be my evaluation for this.

Overall Appraisal

I have done a good analysis based on the information that was available to me. The hebdomadal anticipations give you an penetration about the degree of analysis that is gone into this study. Overall I would rate give “ B ” class to this study.

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