A STUDY OF THE IMPACT OF CRUDE OIL PRICES

ON INDIAN STOCK MARKET

NAME: PRAFUL GOUDAR

USN: 18CQCMD094
INTRODUCTION
Crude Oil price is one of the most significant macroeconomic variables which affect the cost
of production directly or indirectly thus, affecting the future cash flows and profits of
companies. Recent years especially after Gulf War (1990-91) and Iraq War (2003) had
resulted sharp swings in oil prices, with oil price reaching as high as $148/bbl., followed by
an equal dramatic fall in prices. Price increase will decrease the demand which in turn need
fewer dollars for oil import. Trade deficit will also be lowered down leading to lesser pressure
on rupee-dollar rate. Not only petrol price but the price of diesel and kerosene will also be
increased to have more prominent impact.

NEED OF THE STUDY

If rising oil prices lead to higher inflation expectations over
the longer term, rising energy and wage costs are more
likely to be passed through in terms of rising consumer
prices. Increase in oil prices can depress the supply of other
goods because they increase the costs of producing them.
OBJECTIVE OF THE STUDY
1. To study the fluctuations in Crude Oil price (Brent Crude) in the last ten
years (2009-18).

2. To evaluate the impact of Crude Oil price on Indian Stock market.

RESEARCH METHODOLOGY

The study was empirical in nature and the total

population consisted of all the global Oil
Markets and various stock exchanges functioning
today. Out of which only Brent Crude is selected as
reference for oil price and the study is limited to Indian
stock market represented by BSE SENSEX
METHOD
The secondary information is gotten from different sources. The accompanying outside
secondary information sources have been used for information collection: -
 BSE website
 PPAC website
 Commercial websites

In this study we have taken S&P BSE SENSEX as dependent variable and crude oil price as
independent variable. To find out the relationship between crude oil and Indian stock market
I used Trend analysis Correlation using excel and even hypothesis testing is also done, I will
prove whether the crude oil price has impact on Indian stock market (SENSEX).
Tools for data analysis: -
Trend analysis
Correlation
SECONDARY DATA

1 CRUDE OIL – YEARLY AVERAGE PRICE ($ PER BARREL)

Year Average %Change

2008-09 83.57 -17

2009-10 69.76 22

2010-11 85.09 31

2011-12 111.89 -4

2012-13 107.97 -2

2013-14 105.52 -20

2014-15 84.16 -45

2015-16 46.17 3

2016-17 47.56 19

2017-18 56.43 24
HYPOTHESIS

Let the null hypothesis is

H0: There is no relationship between
crude oil prices and BSE SENSEX
And alternative hypothesis
H1: There relationship between the
crude oil prices on BSE SENSEX
MAJOR FINDINGS AND CONCLUSIONS
FINDINGS:
It is found that the maximum positive percentage of change with respect of crude oil
price is 31 which is observed during the year 2010-11.

It is found that negative percentage of change with respect to crude oil price is -2 which
is observed in the year 2012-13.

It is observed that fluctuations in crude oil price will bring changes in BSE. But such
fluctuations differ from market to market and period to period.

Henceforth through this research, it has been discovered that there is effect of crude oil
costs on Indian economy. This effect is reflected legitimately in month of march.

It is commonly seen that rising oil costs for the most part bring about consistent losses in
securities exchange and vice versa.

There are many other factors that effects stock market hence we cannot say that the price
of the crude oil is the only factor responsible for fluctuations in BSE.

Crude oil is one of the most important commodities across the globe because it decides
the real interest rates and level of inflation. Small change in crude oil price effects various
economies in different manner.

Rise in oil price increases dollar demand which hurts rupee-dollar exchange rate.

Changes in crude costs are called oil shock. These shocks affect macroeconomic factors
of a country and India specifically, on the grounds that we rely upon crude imports to meet
Eighty percent of the local oil demand. This in turn, brings about spending or sparing huge
amount on foreign exchange.
CONLUSION
1)There are many other factors affecting the movement in SENSEX we
cannot directly say that crude oil price is only factor that effects Indian
stock market. The changes in crude oil costs are inversely co related
with SENSEX for example increment in crude oil costs brings about
decrease in SENSEX and the other way around.

2)This report does not relate all Indian stock market volatility to oil
prices, as it is one of the many factors affecting corporate earnings such
as unemployment, GDP, exchange rates, etc.

3)This helps us to believe that crude oil prices have a significant

impact on the Indian stock market.