RELATIVITY OF INDIAN STOCK MARKET WITH EXCHANGE RATE, GOLD AND CRUDE OIL

A.N. Vijayakumar

DOI: http://dx.doi.org/10.12775/CJFA.2020.024

Abstract


Stock market return is a motivating factor to investor in investment and portfolio decisions. Markets attracts domestic and foreign investments in anticipation of higher returns considering several parameters. These returns are influenced with economic, taxation and geo-political factors. Investment decision at market discounts with fluctuations of oil, exchange rate and gold. India being the largest consumer, the demand for crude oil and gold has been increasing and lead to higher import bill impacting fluctuations on exchange rate (USD-INR). Investor’s investment decisions at market discounts with volatility of oil, exchange rate and gold. This study with causal research method using 25 years of data administered Johansen co-integration and Vector Error Correction Model to explore the relative impact of exchange rate, crude oil and gold on Indian stock market. The study finds presence of long run relationship of exchange rate, gold and crude oil with market returns and absence of short run relationship. The findings shall facilitate in understanding the impact of fluctuations and investment decisions to benefit from Indian stock market.

Keywords


co-integration; crude oil; exchange rate; gold; stock market

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References


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