Chaudhuri, 2020a

Overview of the Indian Economy

Empirical analysis of financial markets, exchange rate movements and industrial development

Synopsis

This book brings together papers which highlight various aspects of development of the Indian economy in the recent past. It covers Indian financial markets, movements in the exchange rate, and value creation and innovativeness of the manufacturing sector. In the various chapters, application of analytical tools like R, Artificial Neural Network (ANN), Clustering are demonstrated. While two papers dwell on sectoral characteristics and portfolio choice for value creation, two papers focus on understanding stock market volatility and the sources of volatility.

For understanding industrial development, economic profit generated by Indian manufacturing companies are calculated over two time periods to see whether there has been any fundamental change in their performance and the sectors within which they belong. The purpose is two-fold. First, to get an idea about how Indian companies have fared over the two time periods and whether there has been any structural change. Second, help companies decide on their next strategic move and allocate funds for the purpose.

The reasons for studying stock market volatility are that it i) aids in intraday trading, ii) is the basis of neutral trading in the options market, iii) affects portfolio rebalancing by fund managers, iv) helps in hedging, v) affects capital budgeting decisions through timing of raising equity from the market and its pricing and also vi) affects policy decisions relating to the financial markets. In todays globalized environment, with increased financial integration and also enhanced trade in goods and services, volatility in one country spreads to other countries almost immediately. In India, where foreign institutional investors (FIIs) are large players in the stock market, their fund allocation is shaped by macroeconomic conditions in other economies. Thus any macroeconomic event in any part of the world causes reallocation of FII funds, leading to volatility in Indian stock markets.

Any discussion on exchange rate movements and forecasting should include explanatory variables from both the current account and the capital account of the balance of payments. In our study we include such factors to forecast the value of the Indian rupee vis a vis the US Dollar. Further, factors reflecting political instability and lack of mechanism for enforcement of contracts that can affect both direct foreign investment and also portfolio investment have been incorporated.

Introduction

Chapter I
Value creation by Indian companies: A comparative study over two time periods
Aditya Jhunjhunwala, Tamal D. Chaudhuri & Gulshan K. Bhamrah

Chapter 2
Can portfolio returns exceed market return? An examination of the efficient market hypothesis for the Indian stock market
Tamal D. Chaudhuri & Gulshan K. Bhamrah

Chapter 3
An alternative framework for time series decomposition and forecasting and its relevance for portfolio choice – A comparative study of the Indian consumer durable and small cap sectors
Jaydip Sen & Tamal D. Chaudhuri

Chapter 4
Using clustering method to understand Indian stock market volatility
Tamal D. Chaudhuri & Indranil Ghosh

Chapter 5
Forecasting volatility in Indian stock market using artificial neural network with multiple inputs and outputs
Tamal D. Chaudhuri & Indranil Ghosh

Chapter 6
Artificial neural network and time series modeling based approach to forecasting the exchange rate in a multivariate framework
Tamal D. Chaudhuri & Indranil Ghosh

Chapter 7
A predictive analysis of the Indian FMCG sector using time series decomposition – based approach
Jaydip Sen & Tamal D. Chaudhuri

About the Editor

Professor Tamal Datta Chaudhuri did his graduation in Economics from Presidency College, Calcutta and his MSc in Economics from Calcutta University. He obtained his PhD in Economics from The Johns Hopkins University, USA. He taught in Calcutta University for 15 years and then joined a Development Financial Institution, Industrial Investment Bank of India, where he became Chief General Manager in Charge. He has 42 years of teaching experience and 23 years of industry experience. He has taught in several institutes like Indian Statistical Institute, Calcutta, ICFAI Business School, Calcutta and Hyderabad, IISWBM, IIFT, IMT Ghaziabad and Towson State University, Maryland, USA. He was Visiting Fellow at the University of Illinois, Urbana Champaign, USA. The subjects that he has taught are Microeconomics, Macroeconomics, Critical Analysis of Organizations, Stock Market Simulation Game, Concepts in Management, Security Analysis and Portfolio Management, Corporate Finance, Financial Derivatives Management, Risk Management in Banks and Treasury and Foreign Exchange Management. He has published several research papers in domestic and foreign journals and has a few books to his credit. Dr. DattaChaudhuri has executed research projects on behalf of the Planning Commission and the Department of Science and Technology, Ministry of Science and Technology, Government of India. He has been an invitee to the Salzburg Seminar, Austria. He is currently Professor and Dean of Calcutta Business School, Calcutta, India.