Flannery and Protopapadakis (2002) indicate that macroeconomic variables causes the risk which affects the stock

return and inflation and money supply has significant effect on equity return. Inflation is directly effected the economy of the country and stock returns are the indicator of the economy.

Patra and Poshakwale (2006) describe that inflation, trading volume and money supply short run and long run equilibrium relationship with stock return while exchange rates has no relationship with stock return in Athena Stock Exchange.

Hondroyiannis and Papapetrou (2001) intimated that interest rate is positively associated with stock return while growth in industrial production is negatively associated with stock return shocks.

Al-Jafari, Salameh and Habbash (2011) indicated casual relationship between macroeconomics variable and stock return in developed and emerging market by using Granger Causality Test.

Hussainey and Ngoc (2009) explored that domestic production sector, money market and stock return has statistically significant association in Veit Nam and US macroeconomics variable also had significant impact on Veit Nam economy.

Inflation Consumer price index is taken for the proxy of inflation. Inflation is the rise in the price level of goods and services. Kaul (1987) had described the negative relationship between inflation and stock return.

Gultekin (1983) argued that there is lack of positive relationship between inflation and stock return in mostly countries consistently. (26 countries)

Fama (1981) intimated that there was positive relationship between inflation and stock return post II world war but after this there is consistently negative relationship between inflation and stock return in America.

Crosby and Otto (2000) estimated the relationship of inflation and stock return in thirty four countries and argued that there is statistically no significant relation between inflation and stock return in most of the countries. Adrangi, Chatrath and Shank (1999) discussed that inflation had short term negative relationship with stock return while in long run this relationship is very weak. Kim and In (2005) argued that inflation and stock return has positive relationship in short term while negative relationship exist in long run between them. The relationship between inflation and stock returns may be depended on the behavior of long run and short run investments. Hartman (1979) argued that inflation in the inflating country have positive relationship with stock returns but negative relationship with the prices of other country capital stock. This indicated that effect of inflation on one country is also related with other countries. Ahmad, Khan and Javaid (2012) found significant negative impact of inflation on Karachi Stock Exchange. H1: Inflation is significantly and negatively associated with stock returns.

Interest rates Treasury bills are used as the proxy of interest rate in this study. Interest rate is the amount charged by the lender from the borrower for the use of money. For the point of view of company it is cost of capital which decreases the cash flow of firm. Hasan and Nasir (2008) argued that interest rate had significant and positive relationship with stock return in Pakistan. Kandir (2008) indicated through multi regression that interest rate has significant positive relationship with portfolio returns in Sri Lanka. Chen, Mohan and Steiner (1999) explained that change in interest rate is negatively effect the stock returns while Thorbecke (1987) explored that monetary policys variables such as interest rate has positive impact on stock return and effect on small firm is more than large firms. Mohammad, Hussain, Jalil and Ali (2009) intimated that interest rate and money supply had significant and positive impact on stock return. H2: Interest rate is positively and significantly associated with stock returns. Industrial Production

Industrial production is used as the proxy of growth. Industrial production is the measure of output volume of the nation's manufacturing sector. Industrial production is play very important role in increasing the cash flows of a firm. Kearney and Daly (1998) discussed that industrial production, interest rate and stock return has positive relationship in Australia. Harvey (1989) intimated that Economics Growth (IP) is positive associated with the stock prices of the firms. Herve, Chanmalai and Shen (2011) observed that industrial production index has positive association with share price index in the long run. Laopodis (2006) found weak and negative relation between stock prices and industrial production by using brivariate analysis during 1970s and 1990s while relationship in 1980s was positive. Rizwan and Khan (2007) found positive but insignificant relationship of industrial production with stock return in Pakistani equity market. H3: Industrial Production is positively associated with stock returns.