Question

A study of impact of crude oil prices on indian stock market

Answer 1

The purpose of this present paper is to contribute to
the literature on stock markets and energy prices by studying
the impact of oil price changes on Indian stock market returns.
The study employed various statistical tools like trend analysis,
correlation analysis and regression based modelling in order to
try and establish a relationship between Crude Oil Prices and
Indian Stock Market based on available past data. The span of
this study includes data of Crude Oil Price (Brent Crude) and
Indian Stock Market Index (BSE Sensex) for last 10 years
(2003-12) in monthly Time Series format. As the above
mentioned period (i.e. 2003-12) has witnessed various turmoils
and changes in both Indian and World economy, namely the
Global Recession (2008), Iraq War (2003), Arab Spring (2011),
Iran Nuclear Crisis (2007), etc. Among the four last three had a
significant impact on Oil Prices as they have caused political
instability to major oil producing nations of the Middle East
like Iraq, Iran, Libya, Bahrain, etc. Consequently, the period
experienced marked fluctuations in global crude oil prices and
thus, would prove to be significant for our study. The findings
of the study indicate that oil prices generally follow economic
principles of supply and demand in the long run. Also there
exists a weak but significant relationship between oil price
changes and returns on Indian stock market (BSE Sensex).