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The Stock Market in India

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The Stock Market in India
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The Stock Market in India: Its
Growth and Prospects. by Subid Chakraborty
St. Xavier’s College, Kolkata
(Autonomous)
Email: subid_06@yahoo.co.in
Rachit Agarwal
St. Xavier’s College, Kolkata
(Autonomous)
Email: rachit_agarwal4u@yahoo.co.in
Hemangi Desai
St. Xavier’s College, Kolkata
(Autonomous)
Email: hemangi221@gmail.com
Nilesh Agarwal
St. Xavier’s College, Kolkata
(Autonomous)
Email: nilesh_airan@hotmail.com

Acknowledgement:
We are grateful to the faculty of the Department of Economics, St. Xavier’s College, for their valuable comments on an earlier version of the paper. However, the usual disclaimer applies.

2

Abstract

This study investigates history, growth, prospects and volatility in Indian stock markets.
Specifically, it looks for the possible implications of integration between the financial and the real sector with specific focus on volatility of stock market fluctuations and output. In this paper we analyze the growth of the Indian stock markets and its effect on the economy as a whole. We also examine the Indian stock market on account of the process of financial liberalization in India. The reform program in India and in many developing countries has been producing major changes in the functioning of financial markets. Accordingly, there has been increasing participation of portfolio investors in stocks. We extend the Tobin’s model to a closed economy working under excess capacity. The model integrates stock market with the real sector along the Keynesian effective demand principle. The model is further augmented to include open-economy implications of the stock market.
Our analysis reveals that the Stock Market development unambiguously leads to output expansion through rise in investment in a closed economy. Once economy is open, it involves adjustment in trade balance and money supply. This underscores the importance of international political framework through appropriate sequencing of reforms, introduction of flexible exchange rate regime


References: Isher Judge Ahluwalia & I.M.D. Little ed. “India’s Economic Reforms & Development Essays for Manmohan Singh” (OUP 1995). Mankiw, N. G. Macroeconomics(Worth Publishers), 5th edition Ministry of Finance (1991), Report of the Committee on the Financial System (Narasimham Rakshit, Mihir. “Studies in the Macroeconomics of Developing Countries” (1989), “Some Puzzles of India’s Macroeconomy” (2005) (mimeo). Ray ,Debraj :Development Economics Stoll H R and R Whaley (1990), “The Dynamics of Stock Index and Stock Index Futures Tobin, James (1975). “A General Equilibrium Approach to Monetary Theory”, Journal of Monetary Economics.
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