Introduction:

A stock market, equity market or share market is the

aggregation of buyers and sellers (a
loose network of economic transactions, not a physical
facility or discrete entity) of stocks (also
called shares), which represent ownership claims on
businesses; these may
include securities listed on a public stock exchange, as
well as stock that is only traded privately.
Examples of the latter include shares of private
companies which are sold
to investors through equity crowd funding platforms.
Stock exchanges list shares of common
equity as well as other security types, e.g. corporate
bonds and convertible bonds.

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Stock market as argued by several economists is
believed to exert an impact on the
economic growth of a nation for it provides a
platform where capital can be raised for the
establishment of new projects by companies or
expansion of their operations. As Osho (2014)
noted, stock market plays a major role as an
economic institution which enhances efficiency
in capital formation and allocation, it
allowscorporations and the government to raise long
term capital which enables them to finance new
projects or expand its activities. In support of
the foregoing argument, Jecheche (2011) sees the
stock market to provide the avenue for
growing companies to raise capital at lower cost and
also, companies in countries with developed
stock markets are less dependent on bank financing,
which can reduce the risk of credit
[Link] stock market is seen as a stream for
capital formation, itsimpact on economic
growth might not necessarily be significant. Mark
(2000) quoted Keynes as saying ―the stock
market is not simply an efficient way to raise capital
and advance living standards, but can be
linked to a casino game or game of chance‖. Keynes
arguments stem
Stocks are categorized in various ways. One way is
by the country where the company is
domiciled. For example, Nestlé and Novartisare
domiciled in Switzerland, so they may be
considered as part of the Swiss stock market,
although their stock may also be traded on
exchanges in other countries, for example, as
American depository receipts (ADRs) on U.S.
stock markets.

Objectives of the study

1. To Study the Role of Stock market in Indian
economy
2. To know the impact of Stock Market in Indian
Economy

Research Methodology
In this paper using secondary source of data like
Journals, Magazines, Books, websites of
Impact of Stock Market on Indian Economy. It is
Conceptual Methodology.
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Role of Stock Markets in the Economic Growth of India
The role of stock markets as a source of economic
growth has been widely debated. It is well
recognised that stock markets influence economic
activity through the creation of liquidity.
Liquid financial market was an important enabling
factor behind most of the early innovations
that characterised the early phases of the Industrial
Revolution.
Recent advances in this area reveal that stock
markets remain an important conduit for
enhancing development. Many profitable investments
necessitate a long-term commitment of
capital, but investors might be reluctant to relinquish
control of their savings for long periods.
Liquid equity markets make investments less risky and
more attractive.
At the same time, companies enjoy permanent
access to capital raised through equity
issues. By facilitating longer-term and more profitable
investments, liquid markets improve the
allocation of capital and enhance the prospects for
long-term economic growth. Furthermore, by
making investments relatively less risky, stock market
liquidity can also lead to more savings
and investments.
Almost all major markets, barring India's, closed 2018,
having lost ground compared with
a year ago - wiping off billions in companies' market
[Link], the biggest
loser among Asian stock markets is China‘s, which was
down 25.5 per cent for the year. This is
followed by Japan at 14.9 per cent and the Philippines
at 14.4 per cent. After a frantic first week
of market activity in 2019, India‘s stock market that
gained almost 7 per cent in 2018, is already
down 1 per cent this year.
Signs around the world are not promising. The US-
China trade war is creating
uncertainty in global markets, compounded by the
predicted slowing of most economies around
the world and adding fears that the US Federal Reserve
will continue to raise interest rates on
concerns of inflation. The global economic slowdown
cannot be better illustrated than the darling
of consumer technology, Apple, issuing a warning
about slower sale of its phones than
anticipated. This caused its shares to plunge 10 per
cent on Thursday, wiping almost $ 74 billion
off the market value of the once most valuable
company in the world. It has since recovered
about 4 per cent on the final trading day of the week.

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Nearer home, China reported poor factory numbers in
December, the worst since May
2017. Bloomberg reported Margaret Yang, market
analyst at CMC Markets telling clients,
"Asian markets took a deep dive into negative territory
following another disappointing China
Caixin manufacturing PMI reading. China
manufacturing PMI is falling at a pace faster than
economists' forecast, suggesting globaleconomic
slowdown and trade war are hurting the
country's manufacturing activities."
The first week of trading in Asia ended mixed with
about equal number of markets
declining and gaining for the week. Many markets
recovered some ground on the last day of
trading after falling earlier in the week. The stock
market in India is in great shape for almost 4
years now. Readers can verify the articles we wrote at
the end of 2015 with a very bullish India
stock market forecast. As in any secular bull market
there is tactical bear markets, and, at a
certain point, an end of the bull market. What to
expect from India‘s stock market going
forward? The answer in the form of an outlook is here
in our India stock market forecast for
2019. Arguably, this is more of an outlook rather than a
forecast!The Nitfy 50 index (NIFTY)
representing the largest 50 companies on the India
stock market exchange rose from 7,000 points
at the end of 2015 to 11,751 points in September of
this year. That‘s a 57% increase in 3 years. Is
this a reason to sell, to take a wait-and-see mode for a
while, or buy? The outcome of our India
stock market forecast for 2019 should provide guidance
to this question.

India stock market forecast 2019 vs. emerging markets

forecast 2019
Before answering the questions outlined above we want
to highlight that our India stock market
forecast for 2019 is strongly influenced by intermarket
dynamics. No surprise, there is a strong
correlation with emerging markets (EEM), no surprise,
as India is one of the largest markets.
As explained in great detail in our Emerging
Markets Forecast For 2019 both the
emerging market currencies (CEW) as well as the Euro
are leading indicators. Emerging market
currencies have a chart with a similar setup as
emerging stock markets: an amazing rise between
Jan 2016 and Jan 2018, followed by a retracement.
The recent retracement brought this
instrument to an important support area. We
wrote: ―Readers should look at this chart as a
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heatmap which is divided in areas based on the
bands of the channel. Emerging markets
currencies went from support to resistance, and now
remain in the upper band of their long term
channel. Our interpretation? The bullish trend of
emerging markets will continue in 2019 unless
the Euro crashes in the next weeks or months.‖
The Euro, and our interpretation of the Euro chart:
―What we conclude after analyzing
this chart in detail as well as the current global market
landscape is the following. Both US and
European stock markets are in ‗risk on‘ mode, the US
more than Europe. The Euro is not in a
strong bullish nor bearish trend right now. Also, the
peak of emerging markets in January of this
year coincided with the Euro being stopped at its 2014
(crude oil crash) breakdown point with no
other major ‗event‘ in any global market. Since then,
also on the Euro chart, no major trend up or
down started.‖All in all we believe our India stock
market forecast for 2019 is not negatively
impacted by leading indicators of emerging markets.
We will get worried if the Euro starts
falling (sharply) as well as emerging market currencies
.
India stock market forecast 2019 vs. 10-year Yields
This brings us to the underlying indicator: U.S. yields.
As explained in How The US
Dollar May Impact Emerging Markets In 2018 and 2019
we said that the primary driver, and
early indicator, for emerging markets is U.S. yields.
―With the strong correlations between the
US Dollar vs emerging markets and commodities, it
becomes clear that the most important
market we are looking at is 10-year Treasury Yields (in
the U.S.). Yes, this is, by far, the most
important market in the world with the most important
influences on a global scale. Bare with us
as Yields are about to reveal future direction of the
Dollar, emerging markets, US stocks,
commodities, and precious metals any time soon!‖
10-year Yields in the U.S. are at a major turning point,
that‘s what we wrote in End Of
40-Year Bull Market In Bonds. They are trying to end
their 40-year falling trend. This, of course,
is breaking news, regardless whether mainstream
media talk about it or not.

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If, and that‘s a big IF, Yields will continue to rise, it
will put pressure on the U.S. Dollar, and
favor emerging market currencies as well as the
Euro. This, for us, is one of the important
indicators for our India stock market forecast for 2019
and beyond.

India stock market forecast: news is the lagging

indicator
We have said it many times before: news is the
lagging [Link] to search for
news as they want to understand the India stock
market forecast, similar to any other market
[Link] it or not, most investors get trapped
by information overload. They read and
keep on reading until they get rely solely on
information and news. As per Tsaklanos his 1/99
Investing Principles, just 1% of the news is relevant to
investors.
This is just one of the financial news updates from a
year ago: ―As Indian equities are set to close
out 2017 near all-time highs—and volatility hovers near
historic lows—analysts say investors
must keep an eye on politics for signs of a turn in the
current bullish sentiment.‖
We also found this Economic Times of India article
suggesting that India‘s stock market would
overtake Toronto, something that has not happened
since 2008: ―Since then, India‘s market
swelled by $800 billion as investors flocked to a
nation where the government boosted
consumption through a job-guarantee plan, streamlined
the indirect-tax system and opened more
industries to foreigners. ‖
Now, one year later, with the Nifty 50 index trading
1,500 points higher (some 15%) we can
clearly see that news tends to be lagging indicator.
Stay away from 99% of the news, for
any market forecast.

India forecasts: economic indicators in 2019

Any forecast should have a fundamental component,
though we do not consider fundamentals as
leading indicators. News is a lagging indicator,
fundamentals are supporting indicators, a small
number of charts are leading [Link] of the
important fundamental growth measures in
India, according to TradingEconomics, are outlined
[Link], is a strongly rising inflation
rate is bullish for its stock market. India‘s inflation rate
is declining right now. Typically, it rises
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in the first half of the [Link] forecasted economic
indicators for 2019 look much better. As
seen on below table, inflation rate, as well as most
other economic indicators, tend to stabilize in
Q3, only to go up sharply in Q1n and Q2. That‘s what
we see for 2019 as well.

Economic effects of the Stock Market

1. Wealth effect
The first impact is that people with shares will see a fall
in their wealth. If the fall is significant it
will affect their financial outlook. If they are losing
money on shares they will be more hesitant
to spend money; this can contribute to a fall in
consumer spending. However, the effect should
not be given too much importance. Often people who
buy shares are prepared to lose money;
their spending patterns are usually independent of
share prices, especially for short term losses.
The wealth effect is more prominent in the housing
market. In Dec 2014, the value of the UK
stock market was US $6.06 trillion so it has a big
impact on wealth.
2. Effect on pensions
Anybody with a private pension or investment trust will
be affected by the stock market, at least
indirectly. Pension funds invest a significant part of
their funds on the stock market. Therefore, if
there is a serious fall in share prices, it reduces the
value of pension funds. This means that future
pension payouts will be lower. If share prices fall too
much, pension funds can struggle to meet
their promises. The important thing is the long term
movements in the share prices. If share
prices fall for a long time then it will definitely affect
pension funds and future payouts.

3. Confidence
Often share price movements are reflections of what is
happening in the economy. E.g. a fear of
a recession and global slowdown could cause share
prices to fall. The stock market itself can
affect consumer confidence. Bad headlines of falling
share prices are another factor which
discourage people from spending. On its own it may not
have much effect, but combined with
falling house prices, share prices can be a discouraging
factor. However, there are times when

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the stock market can appear out of step with the rest of
the economy. In the depth of a recession,
share prices may rise as investors look forward to a
recovery two years in the future.
4. Investment
Falling share prices can hamper firms ability to raise
finance on the stock market. Firms who are
expanding and wish to borrow often do so by issuing
more shares – it provides a low cost way of
borrowing more money. However, with falling share
prices it becomes much more difficult.
5. Bond market
A fall in the stock market makes other investments
more attractive. People may move out of
shares and into government bonds or gold. These
investments offer a better return in times of
uncertainty. Though sometimes the stock market could
be falling over concerns in government
bond markets (e.g. Euro fiscal crisis)

How does the stock market effect ordinary people?

Most people, who do not own shares, will be largely
unaffected by short term movements in the
stock market. However, ordinary workers are not
completely unaffected by the stock market.
1. Pension funds. Many private pension funds will invest
in the stock market. A substantial and
prolonged fall in the stock market could lead to a fall in
the value of their pension fund, and it
could lead to lower pension payouts when they retire.
Similarly, if the stock market does well,
the value of pension funds could increase. Even if
people don‘t own shares, it is quite likely
people with a private pension will have some
connection to the stock market.
2. Business investment. The stock market could be a
source of business investment, e.g. firms
offering new shares to finance investment. This could
lead to more jobs and growth. The stock
market can be a source of private finance when bank
finance is limited. However, the stock
market is not usually the first source of finance. Most
investment is usually financed through
bank loans rather than share options. The stock market
only plays a limited role in determining
investment and jobs.
3. Short-termism. It could be argued workers and
consumers can be adversely affected by the
short-termism that the stock market encourages.
Shareholders usually want bigger dividends.

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Therefore, firms listed on the stock market can feel
under pressure to increase short-term profits.
This can lead to cost cutting which affects workers (e.g.
zero contract hours) or the firm may be
more tempted to engage in collusive practises which
push up prices for consumers. It has been
argued that UK firms are more prone to short-termism
because the stock market plays a bigger
role in financing firms. In Germany, firms are more
likely to be financed by long-term loans
from banks. Typically, banks are more interested in
the long-term success of firms and are
willing to encourage more investment, rather than
short-term profit maximisation.

Findings :
[Link] Market play vital role in Indian Economy
because of stock markets influence economic
activity through the creation of liquidity. Liquid
financial market was an important enabling
factor behind most of the early innovations that
characterized the early phases of the Industrial
Revolution.
2. The Impact of Stock Market on Indian economy is
that people with shares will see a fall in
their wealth. Pension funds invest a significant part of
their funds on the stock market. Therefore,
if there is a serious fall in share prices, it reduces the
value of pension funds. Often share price
movements are reflections of what is happening in the
economy. Falling share prices can hamper
firms ability to raise finance on the stock market.
Conclusion:
Stock markets are one of the factors that affect the
economy, but there are others as well.
Interest rates affect the economy because rising
rates mean higher borrowing costs.
Consumer spending and business investment slows
down, which reduces economic
growth. Falling interest rates can stimulate economic
growth. Fiscal policy decisions also
can affect the economy. For example, large budget
deficits can reduce government
investments and purchases, which can slow down
the economy. Currency fluctuations
can drive up the price of exports, which can harm
export-driven economies.