Commodity Spillovers and Risk Hedging: The Evolving Role of Gold and Oil in the Indian Stock Market

Narayana Maharana (), Ashok Kumar Panigrahi () and Suman Kalyan Chaudhury
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Narayana Maharana: Department of Management Studies, Gayatri Vidya Parishad College of Engineering, Kommadi, Visakhapatnam 530048, Andhra Pradesh, India
Ashok Kumar Panigrahi: Department of Technology Management, NMIMS University, Shirpur 425405, Maharashtra, India
Suman Kalyan Chaudhury: Department of Business Administration, Berhampur University, Bhanja Bihar, Berhampur 761110, Odisha, India

Commodities, 2025, vol. 4, issue 2, 1-19

Abstract: This study examines the volatility and hedging effectiveness of commodities, specifically gold and oil, on the Indian stock market, focusing on both aggregate and sectoral indices. Data have been collected from 1 January 2021 to 31 December 2024 to cover the post-COVID-19 period. Utilizing the Asymmetric Dynamic Conditional Correlation Generalized Autoregressive Conditional Heteroskedasticity (ADCC-GARCH) model, we analyze the volatility spillovers and time-varying correlations between commodity and stock market returns. The analysis of spillover connectedness reveals that both commodities exhibit limited and inconsistent hedging potential. Gold demonstrates low and stable spillovers in most sectors, indicating its diminished role as a reliable safe-haven asset in Indian markets. Oil shows relatively higher but volatile spillover effects, particularly with sectors closely tied to energy and industrial activities, reflecting its dependence on external economic and geopolitical factors. This study contributes to the literature by providing a sector-specific perspective on commodity–stock market interactions, challenging conventional assumptions of hedging efficiency of gold and oil. It also emphasizes the need to explore alternative hedging mechanisms for risk management in the post-crisis phase.

Keywords: commodity; Indian financial sector; hedging; GARCH model (search for similar items in EconPapers)
JEL-codes: C0 C1 C2 C3 C4 C5 C6 C7 C8 C9 D4 E3 E6 F0 F1 F3 F4 F5 F6 G1 O1 O5 Q1 Q2 Q4 (search for similar items in EconPapers)
Date: 2025
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