This paper examines various research studies undertaken in the Indian and international context highlighting the affect of various fundamental factors on the behavior of the stock market. The empirical analysis of these studies exposes a lot of contradictions among them and there prevails a wide gap between the Indian and international research studies. This paper identifies the critical variables, which have significant effect on stock price movements and thereby influencing the entire market movement. The 30 scrips constituting the Sensex are used as proxy to capture the entire stock market movement. Appropriate statistical techniques have been used to establish a meaningful relationship among the various explanatory variables identified through the empirical analysis considering the available research studies. The various explanatory variables, which are acting as major determinants of stock price movements, are condensed into a few critical factors by the factor analysis and the relevance of these factors in influencing the stock market movements is explained in detail. The results reveal that few factors are acting as major determinants of stock price movements and thereby have a significant bearing on the entire market. With the Sensex touching the 13,000 mark, there is a lot of skepticism among the investors about the behavior of the stock market and the safety of their investment in the highly volatile Indian stock market. These factors can be used as a major analytical tool by the investors, corporates, and the brokers to make rational and intelligent investment decisions.

Stock market indices are the barometers of the stock market. They mirror the stock market behavior and the broad trends in the market. There are large number of companies listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) and it is not possible to look at the prices of every stock to find out whether the market movement is upward or downward. The indices like BSE Sensex (Sensitivity Index) and S&P CNX Nifty (NSE 50 Index) give a broad outline of the market movement and represent the market. The main criteria for selection of the scrips to be included in the indices are: market capitalization, liquidity, and proper representation of all industries in the economy. The base year for BSE Sensex is 1978-79 while for S&P CNX Nifty it is November 1995.

There are several fundamental, non-fundamental, and technical factors, which influence the market price of the scrips constituting the index and thereby have a bearing on the behavior of the entire market. There are different variables, which assume greater significance in different years depending on the prevailing economic and stock market conditions. The main problem is to identify the major variables in the form of factors, which have significant bearing on the movement of the Sensex, which is the most comprehensive representative of the Indian stock market.

Applied Finance Journal, Indian Stock Markets, Statistical Techniques, National Stock Exchange, NSE, Bombay Stock Exchange , BSE, Securities and Exchange Board of India, SEBI, SEBI Act, Securities Contract Regulation Act, Securities Contract Regulation Act, Basle International Settlement, Multinational Companies, MNCs, Centre for Monitoring Indian Economy, CMIE.