Predictive Analytics in Indian Stock Market: Integration of Multiple Regression and Neural Networks for Sensex Prediction

Abstract

In current scenario a pervasive symbol has been notified towards the growth of foreign capital flows in the Indian economy. Such cash flows not only symbolized in developed rather it has been also noticed in developing countries. It has created lot of opportunities as well as challenges for investors and policy makers in India. Through FDI and FII international capital flows to our economy. A country’s economic and financial condition can be well reflected by stock market performance.. Since 1980s economists & different policy makers have considered more attention should be given towards the dynamic connection between macroeconomic variables and stock market. The focus of the study was to consider the different macroeconomic variables that are  Money supply, FII, FDI, Forex and the inflation to find out the significance of these variables on the Sensex. The yearly data was collected over a period of 18 years ranging for 2000-2018 from the websites of Bombay stock Exchange (BSE), and RBI. Multiple regression and Artificial Neural Network (ANN) were conducted for making the analysis; the analysis revealed theses variables have significant impact on the Sensex.