Khalid Ashraf Chisti and Saila Shakeel
The present study tries to establish the causal relationship, degree of impact and long run relationship between stock market prices (Nifty 50) with regard to Real Gross Domestic Product and Inflation. Quarterly data from 2007 Q1 to 2017 Q3 has been used and techniques like Augmented Dickey Fuller Test, Granger Causality Test and Johansen’s Cointegration Test has been used to establish the relationship and impact of Real Gross Domestic Product and Inflation on stock prices. The study found that (i) neither RGDP and Inflation Granger Cause stock prices nor stock prices Granger Cause them, (ii) RGDP and Inflation have no statistically significant relationship with the stock prices (Nifty 50) and (iii) there exhibits the presence of long run relationship between stock prices with regard to RGDP and Inflation.
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