Impact of Crude Oil Price, Gold Price and Exchange Rate Fluctuation on Stock Market in India: An Empirical Analysis

There are several indicators of an economy’s performance but stock market is considered to be one of the most important indicators. Over the years there has been an increase in the crude oil prices and gold price in India and even the Exchange rate (USD vs. INR) has depreciated. In this paper, an attempt has been made to find out the relationship among crude oil price, exchange rate, gold price and stock market in India and also to examine the causal relationship among the variables. For the purpose of this research BSE 100 Index has been used as a representative of Indian stock market. Data has been collected for a period of 117 months beginning from September 2008 to May 2018. Augmented Dickey Fuller test, lag selection, Johansen’s co-integration test, Vector Error Correction Model (VECM), Wald test and Granger Causality test have been used and it has been found that a long run relationship exists among BSE 100 index, gold price, exchange rate and crude oil price. It has also been found that out of all other variables selected for the study, exchange rate has a significant impact on the stock market movement in the short run. It has also been supported by Granger Causality test which shows that Gold price Granger causes Crude oil price.