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Introduction
With the advent of information technology, especially the internet-based applications in the capital markets at the global level, information describing the macro and microenvironment of economies is readily accessible. This flow of information has perhaps, made the capital markets relatively more efficient as the stakeholders are better placed to access and act in accordance with the changing dynamics of environment.
In today's globally integrated world, information access is easy and universal. According to the efficient-market hypothesis (EMH) theory ([13] Fama, 1970), an efficient capital market is one in which stock prices change rapidly as the new information becomes avaliable ([19] Maysami et al. , 2004). Several studies have found a correlation between changes in world economy and macro economic variables. These studies also suggest that the movement of stock market indices is highly sensitive to the changes in the fundamentals of the economy, to the changes in the expectation about future prospects ([3] Ahmed, 2008) and may even serve as a proxy for the pervasive risk factors ([5] Brown and Otsuki, 1990).
Conducive macroeconomic environment promotes the profitability of business, which propels them to a stage where they can access securities for sustained growth. Generally, the barometers for measuring the performance of the economy include, among others, real GDP growth rate, rate of inflation, the exchange rate, fiscal position, the debt position and many other factors. These macroeconomic factors are the major determinants of the growth of an economy. Further, as the stock prices accurately reflect the underlying fundamentals, they should be employed as leading indicators of future economic activities.
India's economy has been one of the stars of global economies ([26] Economywatch, 2008), as it is among the fastest growing and fourth largest economy in terms of purchasing power parity in the world. The capital investment boom in the country drives the current growth phase of the Indian economy. Markets react promptly to any news, at times even any forms of instability including but not limited to escalating political tensions or even war rumours of war, change in regulatory environment (business), deemed as negative by the business (investing) community and interest rate fluctuations in general performance of the economy ([28] Moneybiz, 2008). Some other variables like population, movements in global markets, money...