Dynamic Interrelations Among Equity And Commodity Markets: Insights From India Amidst COVID-19 And Geopolitical Turmoil

Abstract

This study investigates the evolving interrelations among India’s equity, crude oil, and gold markets across multiple global shock regimes, including the pre-COVID period, the COVID-19 pandemic, and the Russia–Ukraine conflict. Using daily data from June 2017 to May 2022 and applying a Vector Autoregression (VAR) coupled with a Diagonal BEKK-GARCH (1,1) framework, the analysis captures both return spillovers and time-varying volatility transmission across spot and futures markets. The findings reveal that market dynamics shift sharply depending on the type of external disturbance. Before the pandemic, all markets exhibited significant shock sensitivity and strong volatility persistence, indicating well-integrated behaviour. During COVID-19, gold’s responsiveness to short-run shocks declined, while equity and crude oil remained highly volatile, reflecting segmented safe-haven demand. The Russia–Ukraine conflict generated the strongest structural break, with crude oil emerging as the principal transmitter of geopolitical risk and equity–crude correlations rising sharply, while gold regained its defensive characteristics. The study highlights the asymmetric nature of crisis-driven market linkages and underscores the need for differentiated risk-management strategies, enhanced energy-security mechanisms, and expanded gold-based financial instruments. The results offer important insights for policymakers, investors, and market regulators operating in an increasingly volatile global environment.