Purpose -The purpose of this paper is to examine the long-run relationship between the Indian capital markets and key macroeconomic variables such as interest rates, inflation rate, exchange rates and gross domestic savings (GDS) of Indian economy. Design/methodology/approach -Quarterly time series data spanning the period from January 1995 to December 2008 has been used. The unit root test, the co-integration test and error correction mechanism (ECM) have been applied to derive the long run and short-term statistical dynamics. Findings -The findings of the study establish that there is co-integration between macroeconomic variables and Indian stock indices which is indicative of a long-run relationship. The ECM shows that the rate of inflation has a significant impact on both the BSE Sensex and the S&P CNX Nifty. Interest rates on the other hand, have a significant impact on S&P CNX Nifty only. However, in case of foreign exchange rate, significant impact is seen only on BSE Sensex. The changing GDS is observed as insignificantly associated with both the BSE Sensex and the S&P CNX Nifty. The paper, on the whole, conclusively establishes that the capital markets indices are dependent on macroeconomic variables even though the same may not be statistically significant in all the cases. Originality/value -This study emphasises on the impact of macroeconomic variables on the stock market performance of a developing economy, whose performance is measured by these variables.

The purpose of this study is to investigate the symmetric and asymmetric relationships between changes in implied volatility indices (VIs) and the market returns for Asian, American and European markets over a period of 10 years spanning from March 2009 to December 2019. In this study, the symmetric and asymmetric return–volatility relationships are examined using three different models, in which return and volatility are taken as dependent and independent variables and vice versa. The Granger casualty test is applied to study the lead–lag relation between return and volatility. The major findings of the study are as follows: firstly, there exists a contemporaneous inverse relationship between implied volatility indices and market returns of various international markets. Secondly, there exists an asymmetric volatility–return relation in the emerging markets (India and Japan). Thirdly, the contemporaneous returns produce a significant asymmetric impact on the changes in volatility index. This supports that the behavioral explanations, such as representativeness and affect heuristic, dominate the return–volatility relation. The empirical investigations provide evidence in favor of the fact that implied VIs play an efficient role in capturing the current perception of the risk. The implications of this kind of study for the investment community and regulatory bodies are rather multifaceted. This asymmetric relationship between return and volatility can be useful for volatility traders in determining the market direction during high- and low-volatility regimes. Hence investment in the future and option contracts based on these indices will help traders hedge against volatility in a single transaction.

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