Do Indian stock markets matter? Stock market indices and macro-economic variables

This paper deals with the inter-relationships between stock prices and impo rtant macro-economic variables. Specifically, following macro-economic vari ables. Exchange rate of rupee vis-a-vis the dollar, prime lending rate, nar row money supply, broad money supply, and index of industrial production ar e considered. The econometric analysis uses state-of-the-art techniques suc h as unit root testing, cointegration and error-correction models. The anal ysis and discussion are situated in the context of macro-economic changes, especially in the financial sector, that have been taking place in India si nce the early nineties.