Money Supply vs Index Research

After a long hiatus from Traderji I am back. I intend to do research to see if there is a correlation between money supply vs stock market particularly vs the index, Domestic as well as International
Would need some leads on where can I get data on Interest Rates especially our Indian Data. I understand I should be looking at the Benchmark Prime Lending Rate.
Please let me know if you have any data/ ideas / leads etc.

Hi Neville. 1st of all i think its a great idea in trying to determine the relation between money supply and the index.

Perhaps you could replace PLR with inflation rate as this is the only variable which brings about a change in the amount of money supply in circulation (monetary measure taken by RBI) and then bring it down to bond markets. And at the same time perhaps make a comparison with the rate of return (pre-tax) offered by stock markets in the time period "t" and see the attractiveness of stock markets as well as the phase it is in.

A research paper has been written by someone on the relationship between economic cycles and stock market cycles. Try to use it for leverage. Good Luck in trying to determine the relationship.

Cheers

Hi Neville, good to see this type of research work coming out on our market.
I will start with defining - Which money supply to consider for analysis?
In my view, money supply can be from
- financial system - which is impacted by PLR/SLR/CRR.
- from abroad - may be u would like to look at exchange rate, fll flow, factors impacting FIIs decision to invest in India or emerging mkt, relative performance of our index against other BRIC indices etc
- Indian retail investor / DII - can't think of any factors here.
- anything else like insurance /pension funds etc..

Hope this helps

Hi AW10 : The purpose of the research is to find if there is a correlation between increase in money supply and a consequential stock market expansion and vice versa.I read a white paper which suggest to the contrary.Also several white paper have been written to suggest that there is a correlation( I only know they exist but have not managed to lay my hands on them)
Coming to my question.
Which rate would do you think most accurately represents and an increase in Money supply PLR/SLR/CRR or as lnangia pointed out the inflation rate . And most importantly from where do I get historical rates .

Thanks
Neville