In a globalised business environment ,the top down analysis of the prospects of a firm must begin with the global economy. The government employs two broad classes of macroeconomic policies viz. demand -side policies and supply side policies. The former are meant to influence the demand for goods and services and the latter the supply for goods and services. Fiscal policy is concerned with the spending and tax initiatives of the government. Monetary Policy is concerned with the manipulation of money supply in the economy. To determine the intrinsic value of an equity stock the security analyst must forecast the earnings and dividends expected from the stock and choose a discount rate which reflects the riskiness of the stock. The earnings potential and riskiness of a firm are linked to the prospects of the industry to which it belongs. The prospects of various industries, in turn , are largely influenced by the development in the macroeconomic environment. The macroecono...