Effects of Inflation, Ten-Year Bond Yield Rate, and VIX Index on the Stock Prices of Banks Across All Three Market Capitalizations in India: A regression analysis

Anuragh Nagvekar; Raghavendra Kamath; Teja Simha; Yash Hegde; Aruna Prabhu

doi:10.57159/gadl.jcmm.3.1.240103

Authors

Anuragh Nagvekar Department of Mechanical and Industrial Engineering, Manipal Institute of Technology, Manipal Academy of Higher Education, Manipal, Karnataka, India 576104
Raghavendra Kamath Department of Mechanical and Industrial Engineering, Manipal Institute of Technology, Manipal Academy of Higher Education, Manipal, Karnataka, India 576104
Teja Simha Department of Mechanical and Industrial Engineering, Manipal Institute of Technology, Manipal Academy of Higher Education, Manipal, Karnataka, India 576104
Yash Hegde Department of Mechanical and Industrial Engineering, Manipal Institute of Technology, Manipal Academy of Higher Education, Manipal, Karnataka, India 576104
Aruna Prabhu Department of Mechanical and Industrial Engineering, Manipal Institute of Technology, Manipal Academy of Higher Education, Manipal, Karnataka, India 576104

DOI:

https://doi.org/10.57159/gadl.jcmm.3.1.240103

Keywords:

Inflation, Ten-year Bond Yield Rate, VIX Index, Stock Prices, Banks, Market Capitalization, Regression Analysis

Abstract

This study investigates the impact of critical economic factors—namely, inflation, the 10-year bond yield rate, and the VIX index—on the stock prices of banks operating across different market capitalization segments in India. Through a comprehensive regression analysis framework, this research quantifies the relationships between these economic factors and bank stock prices while accounting for potential variances across large-cap, mid-cap, and small-cap banks. Utilizing data from the past five years, this analysis not only provides a nuanced understanding of how these macroeconomic indicators influence bank stock prices but also explores the specific effects on banks of varying market capitalizations. The findings reveal that small-cap companies are predominantly influenced by internal management decisions and capital allocation, whereas the consumer price index significantly predicts and reflects stock price behavior. Conversely, the bond yield rate and VIX index show minimal impact on stock prices. This study offers valuable insights for investors, policymakers, and financial institutions, aiding in the development of informed investment strategies and risk management practices.

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