Page 98 - IMDR JOURNAL 2023-24

IMDR’s Journal of Management Development & Research 2023-24

closely monitored by market participants and policymakers before taking related financial decisions.
The S&P BSE Sensex's reaction to these variables provides valuable insights into how it responds to

both domestic and global economic changes.

Foreign Institutional Investment has become an integral part of India's financial markets. Its inflow and

outflow of FII can significantly influence stock prices. Gold can also affect investor sentiment. In a

country like India gold prices affect the investment decisions of investors. Investors prefer to buy gold
in the market uncertainty. The Consumer Price Index is an essential tool for measuring inflation. More

inflation reduces the investing power of investors. It directly impacts on the purchasing power of
consumers. Furthermore, the Repo Rate influences the cost of capital for businesses and consumers.

Changes in repo rate directly affect the interest rates in the banks. Therefore, repo rate affects investment
decisions and overall market conditions.

The historical data for the financial year 2022-23has been analyzed. Multiple regression analysis

technique of econometrics is used to study relationship between variables. The goal of the research is to
measure relations between changes in the macroeconomic variables under investigation and movements

of the S&P BSE Sensex. It is anticipated that the results would improve our comprehension of the
behavior of the S&P BSE Sensex. This study provides a basis for informed investment decisions and

potentially influencing economic policies. This research contributes to financial economics and stock

market analysis. Ultimately this study helps in understanding Indian financial markets.

2. Theoretical framework

S&P BSE Sensex index sensitivity is analyzed in the context of Foreign Institutional Investment (FII),
Gold Prices, Consumer Price Index (CPI), and Repo Rates. The possible impact of these elements on the

stock market index's performance is determined by this study.

S&P BSE Sensex Index: The BSE Sensex is a oldest benchmark stock market index in India, It is
calculated using 30 actively traded stocks across various sectors within BSE

Foreign Institutional Investment (FII): FII inflows and outflows have a major impact on the Indian
stock market. FII directly affects liquidity and market trends.

Gold Prices: Gold prices can influence investor behavior and portfolio allocation. For Indians gold
investment is safe investment which hedge against inflation and currency depreciation. Gold prices

potentially affect the performance of equities, including those in the S&P BSE Sensex.

Consumer Price Index (CPI): CPI reflects inflation, which can have implications for interest rates,

corporate earnings, and investor expectations.