Trade and Development Review, Vol 13, No 1 (2020)

Assessing the Impact of COVID-19 on Interactions among Stock, Gold and Oil Prices in India

Paramita Mukherjee, Samaresh Bardhan


In the last two decades the connection between the equity market and commodity markets has increased. Exploring the nature of this linkage in the context of emerging economies, however, is limited. This paper studies the relationship between the stock prices and the prices of two mostly traded commodities in the derivatives market, viz. crude oil and gold in the Indian context. Based on the data in the recent past, the paper employs ARDL model to estimate the long run relationship. It also finds out the impact of a disruption like COVID-19 pandemic on this relationship in the Indian financial markets. The findings point to the fact that the stock returns and the commodity prices are closely linked with each other. Interestingly, the pandemic has altered the relationship. In the pre-COVID period, there was no cointegration among the stock, gold and crude oil prices, but during the pandemic, there is evidence of cointegration and the short run relationship provides interesting insights. In the pre-pandemic period, evidence point to a mutual impact on the two markets, e.g. past values of oil price and gold price influence the stock returns while returns on the stock market influences oil price volatility. However, during the COVID period, apart from crude oil prices, it is the volatility of gold prices, that has emerged as the driver of the stock returns.

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