The Impact of Oil Prices on Stock Prices and Other Macroeconomic Variables in India: Pre‐ and Post‐2008 Crises

Abstract

This paper attempts to explore the impact of oil prices on stock prices, exchange rates, and inflation rates in the Indian economy for the time period May 1996 to April 2017. This relationship will be investigated for pre‐ and post‐2008 crises, with an aim to explore the linkages between oil prices and stock prices. The financial crisis of 2008 affected the Indian economy through the external sector, while the rise in interest rates owing to pressure on domestic liquidity eventually affected exchange rates. The study concluded that there exists a structural break in the year 2008 and that there is a long‐term relationship between the concerned macroeconomic variables. Finally, the theoretical hypothesis that oil prices affect stock prices has been confirmed by considering India as a case study. The study concluds that there exists a structural break in 2008 crises.