Impact of Gold Price and Oil Price on the Indian Stock Market : With Special Reference to the Bombay Stock Exchange Market

Authors

  •   Binu Joseph Ph.D. Research Scholar, Department of Economics, CHRIST (Deemed to be University), Bengaluru - 560 029, Karnataka
  •   Rajeshwari U.R. Assistant Professor, Department of Economics, CHRIST (Deemed to be University), Bengaluru - 560 029, Karnataka

DOI:

https://doi.org/10.17010/ijrcm/2023/v10i3-4/173432

Keywords:

ARDL

, Causality, Gold Price, Oil Price, SENSEX, Stock Market, VAR.

JEL Classification Code

, C1, C5, C58

Paper Submission Date

, April 5, 2023, Paper sent back for Revision, April 10, Paper Acceptance Date, June 15, 2023

Abstract

Purpose : This study aimed to investigate the causative relationship between oil, gold, and the stock market and the effects of gold and oil prices on the stock market, focusing on the BSE SENSEX.

Methodology : Daily data were used in the study for the sampling period spanning from January 1996 to October 2022. The factors under investigation were the price of gold, the BSE SENSEX, and WTI crude oil. The most closely followed bellwether indicator in India is the BSE SENSEX. SENSEX aims to assess the performance of the 30 largest, most liquid, and soundest financial companies listed on the BSE Ltd. in India's several economic sectors. Gold, oil, and stock prices were all analyzed using the vector autoregression (VAR) model. When one or more variables in a model change, the impulse response function (IRF) has been used to explain how the variables in the model change as well.

Findings : No long-term correlation was found in this analysis between the prices of stocks, gold, and oil. The long-term relationship (co-integration) between stock, gold, and oil prices was not found in this study. The oil price influenced both the gold price and the SENSEX in the short term. The analysis also showed that the price of gold and the SENSEX were causally related in a one-way fashion.

Originality : The short- and long-term effects of gold prices on macroeconomic factors like inflation, growth rates, exchange rates, employment effects, and monetary policy have all been studied in economic research. However, little research has been done on how changes in the price of gold and oil affected the SENSEX.

Downloads

Download data is not yet available.

Downloads

Published

2023-12-31

How to Cite

Joseph, B., & U.R., R. (2023). Impact of Gold Price and Oil Price on the Indian Stock Market : With Special Reference to the Bombay Stock Exchange Market. Indian Journal of Research in Capital Markets, 10(3-4), 74–83. https://doi.org/10.17010/ijrcm/2023/v10i3-4/173432

Issue

Volume 10, Issue 3-4, July-December 2023

Section

Articles
Crossref
Scopus
Google Scholar
Europe PMC

References

Arfaoui, M., & Ben Rejeb, A. (2017). Oil, gold, US dollar and stock market interdependencies: A global analytical insight. European Journal of Management and Business Economics, 26(3), 278–293. https://doi.org/10.1108/EJMBE-10-2017-016

Baur, D. G. (2012). Asymmetric volatility in the gold market. The Journal of Alternative Investments, 14(4), 26–38. https://doi.org/10.3905/jai.2012.14.4.026

Huang, R. D., Masulis, R. W., & Stoll, H. R. (1996). Energy shocks and financial markets. Journal of Futures Markets, 16(1), 1–27. https://doi.org/10.1002/(SICI)1096-9934(199602)16:1<1::AID-FUT1>3.0.CO;2-Q

Kaufmann, T. D., & Winters, R. A. (1989). The price of gold: A simple model. Resources Policy, 15(4), 309–313. https://doi.org/10.1016/0301-4207(89)90004-4

Kaur, P., & Singh, J. (2020). Price formation in Indian gold market: Analysing the role of gold Exchange Traded Funds (ETFs) against spot and futures markets. IIMB Management Review, 32(1), 59–74. https://doi.org/10.1016/j.iimb.2019.07.017

Prakash, R. P. (2021). An analysis of the macroeconomic variables impacting the Indian stock market at NSE Nifty 50. Indian Journal of Research in Capital Markets, 8(1–2), 72–78. https://doi.org/10.17010/ijrcm/2021/v8i1-2/165088

Rahman, A. K. M. M., & Mustafa, M. (2018) Effects of crude oil and gold price on US stock market: Evidence for USA from ARDL bounds testing. Finance and Market, 3(1), 1–9. https://dx.doi.org/10.18686/fm.v3.1055

Savadatti, P. M. (2018). Association between Indian and U.S. stock markets: Volatility spillover effect using GARCH models. Indian Journal of Research in Capital Markets, 5(1), 25–34. https://doi.org/10.17010/ijrcm/2018/v5/i1/122906

Singh, N. P., & Tandon, A. (2019). The effect of dividend policy on stock price: Evidence from the Indian market. Asia-Pacific Journal of Management Research and Innovation, 15(1-2), 7–15. https://doi.org/10.1177/2319510X19825729

Tully, E., & Lucey, B. M. (2007). A power GARCH examination of the gold market. Research in International Business and Finance, 21(2), 316–325. https://doi.org/10.1016/j.ribaf.2006.07.001