Determinants of Price Volatility and Stock Returns of Select Companies from Sectoral Indices in NSE

Abstract

Stock Market performance is considered to represent the financial and economic status of a country. Stock Market is an important part of financial market; it acts as an engine of industrial development. It reflects the changing condition of economic health of a country, as the share prices are highly sensitive and depend the newlinechanging economic, social and political conditions. Therefore, it is important to study the determinants of price volatility and stock returns of select companies from Sectoral Indices in NSE. Campbell et a., l 1994 and Poterba et al., 1986 conclude that the impact of stock market volatility on consumer spending is related through wealth effect. Increased wealth will drive up consumer confidence and thus drive down consumer spending. Stock market volatility may also affect business investment and economic growth directly. The major problem of return and volatility have become increasingly important to the Indian investors, regulators, brokers, policy makers, dealers and researchers with the increase in F.I.I.s investment. The major objectives of the study are: To study the impact of sectoral indices on the price of select companies, to understand the relationship between the Macroeconomic Indicators and selected Sectoral Indices and to identify the determinant of price volatility and stock returns of select companies from Sectoral Indices in NSE. The current study is based on secondary data. The existing study is a sectoral and industrialized based study. The researcher used various statistical tools to analyse the Stock Returns and Volatility of select companies from the Sectoral Indices of NSE. From an investor s point of view, these research findings may be massively useful in respect of taking decision on Investment in the Stock Market and particularly for the better range of Stock derivatives for which the investment would be more profitable. Key Words: Stock Returns, Volatility, Sectoral Indices and Macroeconomic Variables.