Spillover Effect of the Oil Prices on the Indian Stock Market

Abstract

The oil prices in 2015 has been the worst hit, with prices dipping to as low as $42 per barrel. The contagion effect of the oil can be felt in all the markets which are integrated globally. Emerging stock market’s volatility is sensitive to both the local and global events. For long we have held to the idea that the increase in oil prices will increase the input costs for most businesses and force consumers to spend more money on petrol & diesel, thereby reducing the corporate earning of the other businesses. And the opposite should be true for the fall in prices This paper is focused to investigate the changes in global oil prices and the Indian stock market volatility for a period of 2004 to 2015. I have tried to investigate kind of impact of global oil price volatility with that of volatility of S&P Oil and Gas index, and more specifically the impact of the global oil prices on the oil and gas based stocks.