Relation between Stock Market, Economic Growth and GDP

STOCK MARKET

STOCK MARKET :1
Contents
Introduction...........................................................................................................................................3
Relation between stock market, economic growth and the GDP...........................................................3
Conclusion.............................................................................................................................................6
References.............................................................................................................................................7

STOCK MARKET :2
Introduction
To gain an understanding of GDP (Gross domestic product) is an important part that affect
the perception of investors because it affects the financial markets but in both the ways either
positively or negatively. After the age of globalisation and liberalisation, trading firms started
earning high corporate earnings because people started investing in financial and stock
market. A fall in GDP mean can low and reduce the pace of economic growth has been
weakening that can result into negative earning of the corporate. Whereas, GDP can have
opposite effect in such a way that rising GDP growth usually creates greater demand for
funds to serve the businesses but on the other side, it can be reason that high GDP is just
reflected due to increasing inflation that results into high interest rates that depreciates the
bond prices. On the other side, decreasing GDP means low rate of inflation as well as less
demand of borrowing and lending that indicates high bond price and low interest rates
(Srinivasan, 2014).
Relation between stock market, economic growth and the GDP
It is more than a century when the Indian stock market emerged. With the increasing and
diversifying economy, demand of capital have shown a significant increase due to
introduction of new ventures with their new product idea. The regulatory body renowned as
“SEBI” which act as a supervisor that companies do not engage unethical methods to raise
funds from investor. It keep a check on the operations of financial market. Whereas NSE and
BSE operates and provides a platform to interact with the investor (Fang, & You, 2014).
These two platforms provide an option to buyer to arbitrage and buy them form the site where
the prices are low after comparing (Carp, 2012). It is widely seen that development of share
market is an important factor that contributes to national growth in India (India Brand Equity
Foundation, 2018). GDP directly or indirectly reflects the personal disposable income of the
people. Moreover, it also increases the income of the people who shows their interest in