Stock Market Sensitivity to Crude Oil and Forex Price Movements-a Study on Nifty 50 Index

Abstract

This study examines the impact of the USD/INR Exchange rate, and the per-barrel prices of WTI Crude oil in rupees on the Nifty 50 index, utilizing monthly data spanning from January 1, 2010, to September 30, 2023. The analysis primarily involves the utilization of the closing returns of the nifty index, the West Texas Intermediate (WTI) oil price per barrel in dollars, and exchange rates. The classical OLS method is sued to analyse the relationship between Nifty, crude oil, and crude oil prices over 166 months. The results reveal that exchange rates have a negative coefficient, suggesting that an increase in exchange rates is associated with a decrease in Nifty50 returns. In addition, the CUSUM test confirms the stability and consistency of our model over time, supporting the absence of structural breaks. This study underscores the dynamic nature of financial markets and highlights the importance of continuous monitoring and risk management strategies. KEY WORDS: Nifty 50, Crude Oil, Exchange Rate