impact of gols price movement on stock market

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Impact Of Gold Price On Stock

Market Movement

Sub:- Foreign Exchange Management

SUBMITTED TO: SUBMITTED BY :

Dr. Munira Habibullah Mistry Mehul (21)

Mistry Nirav (22)



Sensex

� Bombay Stock Exchange is the oldest stockexchange in Asia with a rich heritage of over133 years of existence.

� BSE is the world's number 1 exchange in termsof the number of listed companies(10,000)and the world's 5th in handling of transactionsthrough its electronic trading system.

� SENSEX, is India's first and most popular stockmarket benchmark index. It constitutes 30stocks representing 12 major sectors.



Factor Aff ecti ng Stock mark et

� Demand and Supply

� News

� Earning Per Share� Price/Earning Ratio



Gold

� Gold is the oldest precious metal and forthousands of years it has been valued as a globalcurrency, a commodity, an investment and simplyan object of beauty.

�

India is the world's largest consumer of gold.Indians normally buy about 25 per cent of theworld's gold, purchasing around 700 - 750 tonnesof gold every year.

� India's gold demand is firmly embedded incultural and religious traditions. It is also valuedin India as a savings and investment vehicle and isthe second preferred investment after bankdeposits.



Major Charact eri stic s of Gold

� Gold is unique as it is both a commodity

and a monetary asset.

� There is no true consumption of gold inthe economic sense as the stock of gold

remains essentially constant while

ownership shifts from one party toanother.



Measur ement of gold purity

Pure gold alloysKarat fineness% Gold

24 100

22 91.67

18 75

14 58.3

10 41.67

937.5



RE SE ARCH MET HODOLOGY �

Research Statement:To study the impact of Gold price on Stock

market Movement.

� Objective of Study:

- To Study the relation between gold price andmovement of Indian stock market.

- To study the volatility in Indian stock market andanalyzing the factors or variables like gold price, andtheir impact on Sensex.

� Research Method :- Causal research



� Variables :- Dependent variable is Sensex

- Independent variables are gold price in US$ and IndianRupee.

� Methodology:-

1) Sampling:-In order to does the research on movement of stockmarket (Sensex) with the movement of gold price. We havestudy the monthly prices from January 2001 to Auguest2010.

2) Data Collection:-- In the present study we have taken the monthly closing

data of sensex. (2001-2010)

- And the Monthly gold prices data (2001- 2010)



� Analysis:

Hypothesis testing:

Ho = Independent variable doesnt have any impacton stock market(sensex)

H1 = Independent variable have impact on stock

market(sensex) we have run the regression and anova model

with the help of excel and also we find thecorrelation between dependent variable and

independent variable, coefficient of variationby using these statistical tools we will provewhether all the independent variable impact thedependent variable or not.



Conti

Limitations of the Study:

We cant conclude that the gold price is

the only variable which impacts thestock market. There are many variableslike inflation, FII, FDI, political issues;government monetary polices etc.which is also Influence the stockmarket.



Data Analy si s



Regression Statistics

Multiple R 0.956078623

R Square 0.914086333

Adjusted R

Square 0.912565737Standard

Error 1601.093274

Observations 116

Summary Output



� Here R=95.60% , which show that correlationcoefficient which is highly positive correlation itmeans in this model all the independent variableshave positive correlation collectively.

� Here, R²=91.40%, means all the independent variablehave impact on the dependent variable up to 91.40%

and rest of 8.60% is not explained by our dependentvariables, hence 8.60% and the other factor whichinfluence the stock market.

� Here the adjusted R square = 91.25% means the

explained by the independent variable with perfect,where no error means the real strength of themodel.



df SS MS F Signi f icance

F

Regression 2 3.08E+09 1.54E+09 601.136925 5.95001E-61

Residual 113 2.9E+08 2563500

Total 115 3.37E+09

Anova



if we refer the F table with degree of freedom=2 and

degree of freedom of observation = 115 with pre-determinant level of significant =0.05% = 95% level of

confident.

T.V=4.79 & C.V=601.136925

Hence, C.V> T.V

=601.136925>4.79

Since, C.V>T.V

Null hypothesis =Ho=µ is rejectedAccept the alternative hypothesis =H1

Hence, all the independent variables have impact

on the stock market



C oe ff icients

Stand ar d

Error t Stat P-value Lower 95%

Upper

95%

Lower

95.0%

Upper

95.0%

Intercept -746.3465673 347.0077 -2.15081 0.033621663 -1433.831332 -58.8618 -1433.83 -58.8618

X Variable 1 59.17981479 3.563627 16.60662 4.24758E-32 52.11962669 66.24 52.11963 66.24

X Variable 2 -0.926859787 0.077903 -11.8977 1.17823E-21 -1.081199013 -0.77252 -1.0812 -0.77252

Regr ession mod el



� Y1 = Sensex , X 1 = Gold price in US$ , X 2 = Gold price

in Indian Rupees

� The model can be written as : Y1= a + b1*x1 + b2*x2

�

Sensex = -746.3465673 + 59.17981479(gold price inUS$) + (- 0.926859787 )(in rupees)

� R square for the regression was 0.914086333 andANOVA ( F= 601.136925 ) was also significant

(5.95001E-61 ) indicating the regression is valid andthe two factors are explaining 91.40 % of variance independent variable sensex.



Concl usion

� The two factors are explaining 91.40%variance in dependent variable sensex .So wecan predicted the sensex movement with the

help of gold prices and we get 91.40%.accuracy means gold prices and sensexmovement are in same direction, and only8.60% error that we cant predict.

� Hence, we can conclude that there is positiverelation between the movement of Gold priceon the stock market.



Bibliography

� http://www.bseindia.com/about/introbse.asp(24-9-2010)

� http://www.mcxindia.com/SitePages/ContractSpecification.aspx?ProductCode=GOLD(28-9-2010)

� http://www.bseindia.com/stockinfo/indices.aspx(28-9-

2010)� http://www.bseindia.com/stockinfo/indices_main.aspx?ind

i=BSE30%20%20&fromDate=01/1/1991&toDate=01/10/2010&DMY=M#(28-9-2010)

� http://www.research.gold.org/prices/(27-9-2010)

� http://www.research.gold.org/prices/monthly/ (27-9-2010)� http://www.gold.org/deliver.php?file=/value/stats/statistics

/xls/monthly_prices.xls(27-9-2010)

impact of gols price movement on stock market

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