Impact of Macroeconomic Factors on Bank Stock Returns

This study examines the influence of key macroeconomic variables Gross Domestic Product (GDP), inflation, exchange rate, and interest rate on the stock returns of Indian banking institutions. Using annual data from 2016 to 2025, the research employs descriptive statistics and Ordinary Least Squares (OLS) regression to explore the dynamic relationship between economic indicators and banking sector performance. The findings reveal that GDP and interest rates significantly affect bank stock returns, while inflation and exchange rates show weaker associations. The study emphasizes that macroeconomic stability plays a crucial role in ensuring consistent banking performance and investor confidence. This research contributes to understanding how economic policies and financial market movements jointly influence the profitability and valuation of Indian banks.