This study examined the relationship between stock market index and selected macroeconomic variables since the economic reforms introduced in India. In the empirical analysis, augmented dickey fuller test, Johansen juselius co-integration test, and Granger causality test were employed. The post liberlisation results using johansen juselius indicates that stock market index has a long run equilibrium relationship with the macroeconomic variables such as inflation, Interest rate, industrial production index, money supply, exchange rate, international commodity prices, world stock market returns and world oil prices. The direction of causality using granger causality test shows that stock market returns have both unidirectional and bidirectional causal relationship with macroeconomic variables. In India, macroeconomic variables are the source of investment risk in determining the variations in stock market returns.