This study examines the impact of key commodities and U.S. stock indices on the Nifty 50 index, using advanced econometric techniques to analyze both short-term and long-term relationships. The research focuses on crude oil prices, gold prices, the USD/INR exchange rate, the S&P 500, and the Dow Jones Industrial Average, assessing their influence on the Indian stock market over the period from January 2014 to November 2024.
Employing time-series models such as the Augmented Dickey-Fuller (ADF) test, ARIMA, Granger causality, Johansen cointegration, Vector Error Correction Model (VECM), and GARCH, the study identifies significant interdependencies between these financial variables.
The stock market serves as a crucial component of a nation's financial ecosystem, playing a pivotal role in capital formation, investment opportunities, and economic stability. As one of the most actively traded financial markets, the Indian stock market is significantly influenced by a variety of economic and financial variables, including commodity prices, exchange rate fluctuations, and global market trends. Among these factors, crude oil prices, gold prices, and the USD/INR exchange rate have been extensively studied due to their profound impact on economic activities and market volatility. Additionally, the influence of major US stock indices, such as the S&P 500 and the Dow Jones Industrial Average, has gained increasing attention as global financial markets become more interconnected.
Table of Contents
1. Introduction
1.1 Introduction
1.1.1 Research Problem
1.1.2 Aim and Scope of the Study
1.1.3 Significance of the Study
1.2 Industry Profile
1.2.1 Market Size and Growth
1.2.2 Key Players in the Indian Stock Market
1.2.3 Government Policies and Regulations Influencing the Market
1.3 Company Profile: National Stock Exchange (NSE)
1.3.1 Overview and Historical Background
1.3.2 Market Position and Growth
1.3.3 Product Offerings and Services
1.3.4 Competitor Analysis
1.3.5 SWOT Analysis
2. Review Of Literature
3. Research Design
3.1. Problem Statement
3.2. Objectives of the Study
3.3. Scope of the Study
3.4. Hypothesis
3.5. Variable and Operational Definition
3.6. Method of Data Collection and Source
3.7. Sampling type / Size
3.8. Statistical Design
3.9. Limitations of the Study
4. ANALYSIS AND INTERPRETATIONS
4.1. Augmented Dickey-Fuller Test
4.2. ARIMA Model
4.3. Granger Causality Test
4.4. Johansen’s Cointegration Test
4.5. VECM Model
4.6. GARCH Model
5. Summary of Findings
6. Conclusion
Research Objectives and Topics
This study aims to quantify and analyze the individual and combined impacts of crude oil prices, gold prices, the USD/INR exchange rate, and US stock indices (S&P 500 and Dow Jones Industrial Average) on the Nifty 50 Index. The research addresses the ambiguity in existing findings regarding the interplay of these factors on Indian market benchmarks.
- Impact of commodity prices on the Nifty 50 Index.
- Influence of USD/INR exchange rate fluctuations on Indian stock dynamics.
- Effect of US market performance (S&P 500 and Dow Jones) on the Nifty 50.
- Volatility modeling and spillover effects between assets using advanced econometric methods.
Excerpt from the Book
1.1 Introduction
The stock market serves as a crucial component of a nation's financial ecosystem, playing a pivotal role in capital formation, investment opportunities, and economic stability. As one of the most actively traded financial markets, the Indian stock market is significantly influenced by a variety of economic and financial variables, including commodity prices, exchange rate fluctuations, and global market trends. Among these factors, crude oil prices, gold prices, and the USD/INR exchange rate have been extensively studied due to their profound impact on economic activities and market volatility. Additionally, the influence of major US stock indices, such as the S&P 500 and the Dow Jones Industrial Average, has gained increasing attention as global financial markets become more interconnected (Siddiqui & Roy, 2019).
Despite considerable research in this domain, there remains ambiguity and inconsistency regarding the precise impact and interplay of these factors on the Nifty 50 Index, which serves as the benchmark index for the National Stock Exchange (NSE) in India. While some studies suggest a strong correlation between crude oil prices and stock market movements, others propose that gold functions as a safe-haven asset, behaving inversely to stock indices. Similarly, fluctuations in the USD/INR exchange rate influence foreign institutional investments, corporate profitability, and investor sentiment. However, these relationships are often examined in isolation, and there is a lack of studies that assess their combined impact on the Nifty Index over different time horizons (Husain et al., 2017).
Summary of Chapters
Chapter 1: Introduction: Discusses the importance of the Indian stock market and outlines the research gap regarding how global commodities and US indices affect the Nifty 50.
Chapter 2: Review Of Literature: Examines existing research on the relationships between commodity prices, exchange rates, and various stock market indices.
Chapter 3: Research Design: Details the methodology, including the hypothesis, data sources (2014-2024), and the econometric techniques (ADF, ARIMA, Granger) used for analysis.
Chapter 4: ANALYSIS AND INTERPRETATIONS: Presents the statistical outcomes of various tests, including stationarity tests, trend forecasts, and volatility spillover analysis.
Chapter 5: Summary of Findings: Consolidates the results from the econometric models and evaluates their implications for market participants.
Chapter 6: Conclusion: Summarizes the research findings, confirms the influence of US indices on Indian markets, and provides suggestions for future study.
Keywords
Nifty 50, Stock Market, Commodity Prices, Gold Futures, WTI Crude, Exchange Rate, USD/INR, US Indices, S&P 500, Dow Jones, Econometrics, ARIMA, GARCH, Cointegration, Market Volatility
Frequently Asked Questions
What is the primary focus of this research?
The research focuses on the impact that crude oil prices, gold prices, the USD/INR exchange rate, and US stock indices have on the Nifty 50 Index.
What are the key themes addressed?
The study examines short-term and long-term financial relationships, volatility persistence, and the effects of external global financial events on the Indian stock market.
What is the core research objective?
The objective is to quantify these impacts to help investors and policymakers develop better risk management and investment strategies.
Which scientific methods are employed?
The study uses econometric models, specifically the Augmented Dickey-Fuller (ADF) test, ARIMA, Granger Causality, Johansen’s Cointegration, VECM, and GARCH.
What does the main body consist of?
The main body covers market profiles, literary reviews, research design, detailed statistical interpretations of the variables, and summaries of these findings.
Which keywords define this work?
Key terms include Nifty 50, commodity prices, econometric models, GARCH, and market volatility.
What conclusion does the author draw about the USD/INR exchange rate?
The ARIMA model indicates a potential continued downward trajectory (depreciation) of the Indian Rupee against the US Dollar through 2025.
How is the S&P 500 related to the Nifty 50 according to the Granger Causality test?
The analysis identified a unidirectional causality from the S&P 500 to the Nifty 50, suggesting that past US index performance can help predict changes in the Indian market.
- Quote paper
- Shrey Raithatha (Author), 2025, The Impact of Select Commodities and US Indices on Nifty 50 Index, Munich, GRIN Verlag, https://www.grin.com/document/1568110
