INFLUENCE OF GOLD, OIL AND FOREIGN PORTFOLIO INVESTMENT ON NIFTY & SENSEX MOVEMENTS: A VAR-GARCH AND STRUCTURAL BREAK ANALYSIS (2010-2024)

Abstract

This study investigates the dynamic influence of gold prices, crude oil prices, and foreign portfolio investment (FPI) on Indian stock market movements represented by the NIFTY 50 and S&P BSE SENSEX over the period 2010-2024. Using daily data, the study employs an integrated Vector Autoregression (VAR) GARCH framework along with structural break analysis to capture return spillovers, volatility transmission, and regime shifts. The empirical results reveal that crude oil price shocks exert a significant negative impact on Indian equity returns and substantially increase market volatility, reflecting India’s dependence on imported oil. Gold exhibits a state-dependent hedge and safe-haven role, with negative correlations strengthening during crisis periods such as the COVID-19 shock. Foreign portfolio investment emerges as the most dominant driver of both returns and volatility, with strong bidirectional feedback between equity returns and capital flows. Structural break tests identify multiple regime shifts corresponding to major global and domestic events, confirming that equity–commodity–flow linkages are time-varying and unstable. The findings offer important implications for policymakers, regulators, and investors in managing market risk and financial stability.