Impact of Macroeconomic Indicators, Global Financial Events, and Monetary Policies on the Volatility and Performance of BSE Sensex: An Empirical Study of the Indian Stock Market

Abstract

This study takes a look at how macroeconomic factors, monetary policy, and global financial events affected the BSE Sensex's performance and volatility from 2005 to 2025. It does this by using secondary time-series data and various econometric methods like correlation analysis, Johansen cointegration, VECM, OLS, Granger causality, and GARCH (1,1). The research zeroes in on the link between stock market returns and things like GDP growth, inflation, the repo rate, exchange rate, money supply, crude oil prices, and foreign institutional investments. What it found is that increases in GDP, money supply, and FII inflows generally boosted the Sensex. On the flip side, higher inflation, repo rates, weaker currency, higher oil prices, and global financial disasters dragged down the index. Despite some big hits, the Sensex still shot up from around 10,000 points in 2005 to nearly 80,000 by 2025. This shows that the Indian stock market can hold its ground. It also underlines that keeping a stable economy is key to growing the market sustainably.