This paper empirically analyzes the dynamic relationship between business cycle, investment-specific technology shocks, and stock returns in the Indian context. Using Structural VAR technique the study finds: (1) business cycle shocks and stock market returns are more pronounced, especially during the financial market liberalization (2) the dominant role of global cycles over country cycles in explaining stock returns (3) interest rate plays an important role to interact the business cycle dynamics and stock returns (4) a relatively weak effect of investment-specific technology shocks on the business cycle and stock returns. © 2017 Elsevier B.V.