ABSTRACT
The study examines the effect of macro-economic variables, i.e., interest rate, on equity performance through a robust panel data analysis for which the data is collected from the annual reports from 2015 to 2023 that covers nine years data of the two banks and two fast moving consumer goods companies namely HDFC Bank, ICICI Bank, ITC Limited, and Hindustan Unilever Limited which are prominent players in the Indian stock markets. Fixed-effects regression model is applied to test the firm-specific heterogeneity and has captured sectoral variation in the interest-rate sensitivity. The evidence strengthens the influence of interest rate movements do have differential and substantial effect on stock returns with financial institutions responding at a higher rate than the consumer goods entities. Results also highlight the need for understanding the investor sentiments, market volatility, and industry-specific factors while analysing the macroeconomic pressures on equity markets. The study is a value addition to the existing knowledge of macroeconomic research with reference to interest rate influence on the stock markets.
