Factors Affecting Performance of Stock Market: Evidence from South Asian Countries

This study identifies the factor affecting performance of stock market in South Asia. The data used in this study were collected from the period of 1997 to 2010 of 3 South Asian countries namely, Pakistan, India and Sri Lanka. Regression results indicate that foreign direct investment and exchange rate have significant positive impact on performance of stock market in South Asian countries while; interest rate has negative and significant impact on performance of stock market in South Asia. Results also indicate the negative but insignificant impact of inflation on stock market performance in South Asia. It is recommended that in order to take the full advantage of stock market and carry on with the international markets well managed macroeconomic policies are necessary in which interest rates and inflation rate are thoroughly monitor and try to reduce the value as much possible. It gives the confidence to the investors as well as the industries. It is also recommended that some extra benefits were given to the foreign investors because we observed that the influence of foreign investors is strong in this region.