India highly relies on
the foreign crude oil supply, hence many listed firms in the National Stock
Exchange trade accord the crude oil prices. In this study, we materialize Brent
Oil prices impact on three important Sectoral Indices, stock prices of NIFTY
along with NIFTY 500 Index. Each sector accommodates those stocks, which endure
a close relationship with the crude oil prices. We followed the model developed
by (Lutz Killian, Cheolbeom Park, 2009) for selecting the sectoral indices and
variable in oil market components. VAR and FEVD model assist us in
understanding what determines Indian Oil market prices and whether oil prices
affect the NIFTY sectoral index stock prices. We construct growth model to
assess study further and followed guideline and tests, which are essential for
VAR analyses. It is observed that only energy sectoral index respond to oil
shock and global oil production impact Indian oil demand and oil prices whereas
domestically oil price are determine by oil reserves and oil supply in India.
This study advocates for requirement of Indian oil reserves but does not
provide any cost based analysis.
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