Stock Market Volatility and Inflation in Indian Context for 2008-2011

The most fascinating and exciting place to be in is the stock market. And to understand the movements of the market is even more thrilling. The mystery shrouds the stock market and the euphoria related to it makes it even more enigmatic. The questions that always haunts the policy makers, investors and educationists is does the macroeconomic factor have any say in the movements of the stock market. A number of studies have been conducted to find out which macro economic variables actually affect the stock market. But not much work has been done on specific variables like inflation and its impact on the stock market volatility. This project has been dedicated to solving this mystery. The project work was initiated to discover the dependence of stock market volatility on inflation for a period of 2008 to 2011 in the Indian economy. The period was carefully chosen as it was time when recession hit the global economy and it was pre election and post election period in India. The study was conducted and the findings were very interesting, it revealed that the stock market volatility and inflation was negatively correlated. That is whenever inflation increases the stock market volatility is less. That is when ever inflation increases it is less risky to invest in the stock market. It was also found that the inflation Granger causes stock market volatility