TABLE OF CONTENT

Topic Page No.

Certificate (i)
Acknowledgement (ii)
Executive Summary (iii)
Chapter I: Introduction
1.1 Company Profile
1.2 Organization Chart
1.3 STC at Glance
1.4 Mission & Vision
1.5 Scope of Study
1.6 Different Commodities Traded by STC
1.7 Main Text
Chapter II: Functional Analysis of the Company
2.1 Major Commodities Traded
2.2 Services Offered
2.3 Strategy of the Company
2.4 Key Strategies
2.5 Policies and Guidelines followed by STC
Chapter III: Job Specific Analysis
3.1 Job Performed
3.2 Basic Learning
Chapter IV: Learning Summary
4.1 Summary
References & Bibliography
Appendices

1
 LIST OF TABLE
S.NO. TABLE NAME AND NUMBER Page No.

LIST OF FIGURE

S.NO. FIGURE NAME AND NUMBER Page No.

2
1.1 Introduction to Stock Market

Stock Market is a place where shares of pubic listed companies are traded. The primary

market is where companies float shares to the general public in an initial public offering

(IPO) to raise capital.

Once new securities have been sold in the primary market, they are traded in the secondary

market—where one investor buys shares from another investor at the prevailing market

price or at whatever price both the buyer and seller agree upon. The secondary market or

the stock exchanges are regulated by the regulatory authority. In India, the secondary and

primary markets are governed by the Security and Exchange Board of India. (SEBI)

A stock exchange facilitates stock brokers to trade company stocks and other securities. A

stock may be bought or sold only if it is listed on an exchange. Thus, it is the meeting place

of the stock buyers and sellers. India's premier stock exchanges are the Bombay Stock

Exchange (BSE) and the National Stock Exchange (NSE).

In India, there are two main exchanges: The Bombay Stock Exchange (BSE) and the

National Stock Exchange (NSE). There are also regional stock exchanges in other cities

like Kolkata, Chennai, and Bengaluru, but the BSE and NSE are the two most important

markets for transactions. The Securities and Exchange Board of India (SEBI) is the main

regulator of the stock exchanges in India. The SEBI is established with a goal to foster the

growth of stock markets in India, protect the rights of the retail investors, as well as, to set

the legal framework and regulate the activities of the markets and financial intermediaries.
3
1.2 BSE Sensex

The Bombay Stock Exchange (BSE) is an Indian stock exchange located at Dalal Street,

Kala Ghoda, Mumbai, Maharashtra, India. Established in 1875 the BSE is considered to be

one of Asia’s fastest stock exchanges, with a speed of 200 micro seconds and one of

India’s leading exchange groups and the oldest stock exchange in the South Asia region.

Bombay Stock Exchange is the world's 11th largest stock market by market capitalization

at $1.7 trillion as of 23 January 2015.

More than 5,000 companies are listed on BSE. 94 The Bombay Stock Exchange is the

oldest exchange in Asia. It traces its history to 1855, when four Gujarati and one Parsi

stock broker would gather under banyan trees in front of Mumbai's Town Hall. The

location of these meetings changed many times as the number of brokers constantly

increased.

The group eventually moved to Dalal Street in 1874 and in 1875 became an official

organization known as "The Native Share & Stock Brokers Association". On 31 August

1957, the BSE became the first stock exchange to be recognized by the Indian Government

under the Securities Contracts Regulation Act. In 1980, the exchange moved to the Phiroze

Jeejeebhoy Towers at Dalal Street, Fort area. In 1986, it developed the BSE SENSEX

index, giving the BSE a means to measure overall performance of the exchange. In 2000,

the BSE used this index to open its derivatives market, trading SENSEX futures contracts.

The development of SENSEX options along with equity derivatives followed in 2001 and

2002, expanding the BSE's trading platform. Historically an open outcry floor trading

4
exchange, the Bombay Stock Exchange switched to an electronic trading system developed

by CMC Ltd in 1995. It took the exchange only fifty days to make this transition. This

automated, screenbased trading platform called BSE On-line trading (BOLT) had a

capacity of 8 million orders per day. The BSE has also introduced a centralized exchange-

based internet trading system, BSEWEBx.co.in to enable investors anywhere in the world

to trade on the BSE platform. The BSE is also a Partner Exchange of the United Nations

Sustainable Stock Exchange initiative joining in September 2012.

The list of all companies that have been included in the BSE SENSEX from its inception

in 1986 are 30 well established and financially sound companies. These 30 companies

belong to various sectors of the Indian Economy. The base year of SENSEX is 1978-79

with a base value of 100. During the introduction of the SENSEX in 1986, some of the

companies included in the base calculation in 1979 were removed and new companies

were accepted.

5
1.3 Gold Prices

Gold has been used around the world as an instrument for investment to hedge against

inflation or in the form of jewellery. All these factors are the reason for hyping the demand

for gold day by day. As per world gold council gold demand in India is about to rise 33%

by 2020.The cumulative annual demand will be excess of 1,200 tonnes by 2020.Recently

India has become the largest consumer of gold and price of gold is likely to breach Rs

32,000 mark in the next calendar year. There is an inverse relationship between gold price

and dollar. In this paper, an attempt has been made to investigate the existence of

unidirectional or bidirectional relationship between gold price and Sensex for the period of

10 years (2002-2012). The results of the analysis show that there is no causality between

the gold price and Sensex.

Gold appears to have its own “logics” and mystique. It has traditionally been very

conservative investment due to it's relatively scarcity, but it tends to accurate reflector of

short term fear about the economy in general. Gold has traditionally been considered an

attractive investment in India and its excellent performance in recent years has

substantially confirmed the wisdom of that tradition. When markets are volatile and

investors panic they tend to move out the risky assets such as stock and invest into assets

such as gold. Gold like virtually all commodities is traded on a dollar dominated basis. In

times of crisis, capital often flow out of emerging markets currencies. This makes it a

doubly attractive investment for Indian investors in volatile times, the rise in the rupee

6
price of gold is fuelled by both the increase in international gold prices and by the

appreciation of the dollar against the rupee. Gold as an investment option was dramatically

illustrated in early 2009. Gold surged even as global stock markets plunged and the rupee

briefly traded at Rs. 51 to the dollar.

Prior to the introduction of liberalization and globalization policies, gold prices in India

showed an increasing trend (Figure-1). In the post liberalization period, the average annual

prices of gold also showed an increasing trend from the year but, it showed a decreasing

trend in 1997 and 1998 and again showed an increasing trend in the year 2000. From 2002

to 2012, gold prices are continuously increasing. The domestic gold price in India is

continuously increasing due to its heavy demand in the country. There are several reasons

gold has high demand in India. The first reason is security; gold offers full security as long

as it is retained by central banks. There is no credit risk attached to gold. Secondly, gold is

able to maintain its liquidity even at times of crisis situations like high global inflation or

political turbulence. The third reason for holding gold is to build a diversified portfolio.

Gold also has taken the role of an asset of last resort. World Economic History shows that

countries have repeatedly used gold as security against loans when they have had

difficulties with their Balance of Payments and have felt the need to borrow on the

international capital markets.

7
1.4 Current Prices of gold in relation with Sensex

39714.20

-117.77
(-0.30%)

Intraday 52 Week
OPEN: 39,998.91 HIGH: 40,122.34 40,124.96
PREV CLOSE: 39,831.97 LOWS: 39,374.24 33,291.58
Returns - Sensex

YTD : 10.11% 1 Week: 0.70% 1 Month: 1.70% 3 Months: 10.70%

6 Months: 9.70% 1 Year : 12.40% 2 Year : 27.50% 3 Year : 48.90%

Simple Moving Averages

30 Days : 38,671.72 50 Days : 38,628.26 150 Days : 36,767.79 200 Days : 36,814.74

This chart explains the current values of gold prices on the Sensex. Sensex open at the

price of Rs.39998.91 and it closes on Rs. 40122.34. This shows the moment of sensex on

daily basis and the other figures mention shows the prices from last Six months and the

variations occur on YTD i.e Year to Date, which means from last year prices to till date

prices.

8
1.5 Relationship with gold prices and Stock market indicies

In an economy, a stock market does play an important role. It makes mobilization of funds

possible across the economy. The development of stock market is important from industry

and investors’ point of view. Stock market is considered as a barometer of an economy. An

economic slowdown may lead stock market towards collapse, and therefore, the

government has to closely monitor the movements in the stock market. A stock market

index is mainly affected by the changes in the economic fundamentals. India being a

developing country, many researchers have tried to find out the macroeconomic variables

effect on the Indian stock market in the last few decades.

There are two different theories on the relationship between gold demand and income. The

classical theory argues that there exists a positive relationship between gold price and real

income, while Keynesian theory argues that more demand means more economic

backwardness hence low income, which indicates an inverse relationship. India and China

are the major gold purchasers in the world. In the last 10 years, Indian population has

increased by 12%, while the demand for Indian gold has increased by 13%. According to

the World Gold Council (WGC), Indians own more than 18,000 tons of gold, which

represents 11% of the global stock and is the largest in the world.

9
Reasons for unexpected sudden decline in Price of Gold in the year 2013

India being, the world's biggest buyer of the metal, extended losses to their lowest level in

three weeks, though physical sales remained lacklustre as seasonally dull demand weighed.

Global gold fell over 1 per cent, extending last week's seven per cent decline, hurt by a

stronger dollar amid worries over an early end to the U.S. Federal Reserve's stimulus

programme.

A weaker rupee kept the downside in prices limited. The rupee plays an important role in

determining the landed cost of the dollar-quoted yellow metal.

The wholesalers feel that there no supplies in the market and their sales have declined by

75 per cent. India imposed a ban on consignment imports in May, but has ruled out a

blanket ban on gold imports or any increase in customs duty from the current 8 per cent.

Gold imports into India fell from an average of $135 million per day in the first half of

May to $36 million in the second half

Forecast of Gold Price in India for the next five years

The forecast function calculates, or predicts, a future value by using existing values. The

predicted value is a y-value for a given x-value. The known values are existing x-values

and y-values, and the new value is predicted by using linear regression. We can use this

function to predict future sales, inventory requirements, or consumer trends.

10
Returns Analysis

We can observe that in the year 2008, though the Return on Sensex and Nifty were

negative, The Return on Gold was positive, whereas in the mid 2013, Return on Gold is

negative though the Return on Sensex is positive. It is still to be observed would Gold

Returns change during the end of the year 2013.

1.6 A Study of Indian Stock Market BSE Sensex and Gold Prices

The primary objective of the current study is to investigate the relationship of independent

variable Gold Price on Indian stock market BSE SENSEX. Independent macroeconomic

variables influence return of the organizations in turns strongly affects the stock prices and

support the relationship between dependent and independent variables. The present study

uses the monthly closing data for the period starting from Jan 2000 to Sep 2016 collected

from secondary sources like Bombay stock exchange and YCharts.com. The methodology

is designed with the application of statistical and financial econometrics model like

descriptive statistics, correlation and regression model. Results: The empirical results

reveal that BSE SENSEX reactions to shocks on Gold Prices is positive. This whole study

is explained in Chapter-2 Literature Review.

11
2.1 BASIS OF LITERATURE

There have lot of changes made in India economy primarily driven by liberalization and

globalization since 1991. These changes have impacted positively or negatively almost all

the sectors of our economy along with India Capital market. Multiple factors play its role

in the growth of economy such as macroeconomic variables, performance of industry and

investment climate, political stability etc. In this study we pertain to perform comparative

analysis between Indian Stock Market and variable Gold Price (GP). The objective of the

study is to investigate the relationship between Indian Stock market BSE Sensex and

Gold Price (GP) This chapter of the project briefly represents and reviews of existing

related literature on the linkages between stock price and macroeconomic variables. i.e.

Gold Prices.

2.2 BRIEF REVIEW OF EXISTING LITERATURE

The section outlines the review of the related literature.

Narang and Singh (2012) examined the causal relationship between Sensex and gold

price by using monthly data. They applied ADF and Johansen’s co-integration test to find

out stationarity and integration of order one. They found positive correlation between stock

returns and gold price from 2002 to 2007 but due to economic crisis in USA in 2008 and

2011, no long term relationship was found. Granger causality test revealed that returns of

Sensex does not lead to increase in gold returns and vice-versa.

12
Sireesha (2013) examined the impact of macroeconomic factors and the variations

introduced in Indian Stock Market via them. Linear regression technique was the key

fundamental behind her research methodology and she performed analysis on Nifty, Silver

and Gold returns via same. Gold and silver are considered primarily for analysis as these

have been lucrative to the Indian investors and hence are studied in parallel with the stock

returns. Internal variables and their performance revealed interdependence between these

variable with returns on stock, gold and silver. GDP and Inflation has significant influence

on Stock Return whereas Money supply had the same on Gold Returns.

Venkatraja, B. (2014) spent time analyzing the existence and extent of relationship

between the performance of Indian Stock Market with context to the various

macroeconomic variables. These variables include price of gold, index of industrial

production, inputs from foreign institutions in terms of investment, wholesale price index

and the effective exchange rate. Analysis was conducted on grounds of monthly data

collected starting April 2010 and spanning until June 2014. Technique involved behind the

research was regression methodology. As an outcome of the research it was discovered

BSE Sensex was positively influenced by all the macroeconomic variables listed above

except the gold price, in fact gold price had an inverse relation with Stock market

variations for BSE Sensex. In addition, it was discovered that coefficients of all the

variables were statistically noticeable except for the index of industrial production.

13
Luthra and Mahajan (2014) in their study aimed to analyze the impact which certain

macroeconomic factors had on BSE Bankex. The fundamental variables covered for the

analysis include growth rate of GDP, inflation rate, exchange rate and the price of gold.

Shedding details on the BSE Bankex, it is basically an index launched by BSE that

includes the banks (both public and private sector) listed on the Bombay Stock Exchange.

Index of BSE BANKEX has online visibility and display across the nation on the BOLT

trading terminals. As an outcome of the study it was evident and conclusive that BSE

Bankex was influenced positively by the exchange rate, rate of inflation and GDP,

however was inversely impacted by Gold Price. Further it was concluded that stock prices

for banks were not at all influenced by any of these variables.

Naveen Kumar (2015) In his paper, the casual relationship has been examined between

Sensex and gold price. The study uses the monthly data which is collected from Reserve

bank of India, Bombay bullion association and from bse-india.com. The results of

Augmented Dickey- Fuller test conclude that the series are stationary and integrated of

order one. There is a positive correlation between stock returns and gold price from 2002

to 2007 but due to economic crisis in USA in 2008 and 2011 this correlation seems to be

fading and it was establish by using correlation and Johansen's co-integration test that there

is no relation between gold prices and stock returns i.e. Sensex return in the long run

period. The results of Granger causality test reveals that returns of Sensex index does not

lead to increase in gold price and rise in gold price does not lead to increase in Sensex.

14
3.1 METHODOLOGY AND DATA COLLECTION

The research methodology starts with collecting secondary data on macroeconomic

variable Gold Price and Indian stock exchange (BSE - SENSEX) on the basis of objective

defined.. It is followed by quantitative analysis of the data using both descriptive and

inferential statistics technique.

Null Hypthesis Alternate Hypothesis

Gold Price Per There is no significant relation There is a significant relation between

Ounce on INR between Gold Price (GP) and Indian Gold Price (GP) and Indian Stock

Stock Market Market

3.2 VARIABLE – GOLD PRICE

Gold has been used in the market since 1971 as a commodity. The importance of gold has

been increased in the present world due to the financial crisis in the present economic

world. The investors are investing in the Gold. In the recent decade the gold prices and oil

prices rise day by day. Gold is treated as an alternative investment avenue. It is often stated

that gold is the best preserving purchasing power in the long run. Gold also provides high

liquidity; it can be exchanged for money anytime the holders want. Gold investment can

also be used as a hedge against inflation and currency depreciation. From an economic and

financial point of view, movements in the price of gold are both interesting and important.

It is often argued that investment in gold is historically associated with fears about rising

inflation and/ or political risk. However, financial markets do not currently show the

classic symptoms associated with such fears. Gold is a financial instrument that owns the

15
characteristics of both a commodity and currency. In the past it was used as money and as

a medium of exchange. Nowadays, it acts as a store of wealth and it is a known instrument

for investment uses. It has been highly demanded for many reasons such as scarcity, highly

mobile, liquidity and uniformity. The price of gold depends on the supply and demand for

the commodity and government auction policy. Since gold is also used to hedge the risks,

investors tend to replace their shares with gold, which results in a lower demand for shares

and volatility on stock markets. Therefore, getting a better understanding of this linkage

will help investors and firms to diversify their portfolios and reduce their risks

3.3 RESEARCH DESIGN

To achieve the defined objective of current study, different methods have been used. To

start with, to fulfill the research objectives, descriptive statistics like standard deviation,

coefficient of determination, mean, etc. are supported to show the nature and basic

characteristics of the variables used in the analysis. Correlation and Regression model is

the next step to move towards the objectives of this study and finding any relation between

the stock market and macroeconomic variables.

16
3.3.1. DESCRIPTIVE STATISTICS TECHNIQUE

Descriptive statistical analysis is conducted to define the effect of changing values on

measures of central tendency, variation and shape. The descriptive statistical tools

calculated for measurement of macroeconomic variables and Indian stock index SENSEX.

The descriptive statistics of the secondary data also helps in understand the hidden patterns

of the macroeconomic time series.

3.3.2. CORRELATION AND REGRESSION

Correlation is a term that refers to the strength of a relationship between two variables.

Correlation matrixes of all variables including their transformation are determined. The

correlation coefficients thus calculated, indicate strength of relationships between these

variables. Correlation coefficients can range from -1.00 to +1.00. The value of -1.00

represents a perfect negative correlation while a value of +1.00 represents a perfect

positive correlation. A value of zero means that there is no relationship between two

variables.

Linear Regression is a statistical analysis which uses an independent variable to assess the

outcome of the dependent variable Y. Simple linear regression relates two variables (X and

Y) with a straight line (Crawley, 2012a). The regression analysis is used to find the

connection between one dependent variable and at least one independent factor. It is also

used for either expectation or anticipating, and can be then used to fit a prescient model to

an independent and dependent informational index

17
 3.4. DATA COLLECTION

In this study, data was collected for variables BSE-SENSEX and Gold Prices for the

duration starting from Jan 2000 to Sep 2016. BSE SENSEX DATA A stock index is a tool

used by shareholders, investors and financial experts to illustrate the market and also to

compare the return on specific investments. Market indexes are intended to represent an

entire stock market and thus track the changes in the market over time.

The Table 3.1 below contains the monthly closing data of BSE-SEXSEX for the last 20

quarters with 60 observations for the period starting from Jan, 2013 to Sep, 2017

Table 3.1: Monthly closing of BSE - SENSEX (Jan, 2000 to Sep, 2016)

Monthly Closing
Year Jan Feb March April May June July Aug Sept Oct Nov Dec
2001 5205 5447 5001 4658 4434 4749 4280 14477 4090 3711 3998 3972
2002 4327 4247 3604 3519 3632 3457 3329 3245 2812 2989 3288 3262
2003 3311 3562 3469 3338 3126 3245 2988 3181 2991 2949 3229 3377
2004 3250 3284 3049 2960 3181 3607 3793 4245 4453 4907 5040 5839
2005 5696 5668 5591 5655 4760 4795 5170 5192 5584 5672 6234 6603
2006 6556 6714 6493 6154 6715 7194 7653 7805 8634 7892 8789 6398
2007 9920 10370 11280 12043 10399 10609 10744 11699 12454 12962 13696 13787
2008 14091 12938 13072 13872 14544 14651 15551 15317 7291 19838 19363 20287
2009 17649 17579 17287 17287 16416 13462 14356 15465 12860 9788 9093 9647
2010 9424 8872 19445 11403 14625 14494 15670 15667 17127 15869 16926 17465
2011 16358 16430 17404 17559 16945 17701 17868 17971 20069 20032 19521 20509
2012 18328 17823 18836 19136 18503 18846 18197 16677 16454 17705 1612 15455
2013 17194 17753 17404 17379 16216 17430 17236 17430 18763 18505 19340 19427
2014 19595 18862 18836 19504 19760 19396 19346 18620 19380 21165 20792 21171
2015 20514 21120 22386 22418 24217 25414 25895 26638 26631 27866 28694 27491
2016 29183 29362 27957 27011 27828 27781 28115 26283 26155 26657 26146 26118
2017 24871 23002 25342 25607 2666 29000 28052 28452 27866

18
 35000
Series1
30000
Series2
25000 Series3
Series4
20000
Series5
15000 Series6

10000 Series7
Series8
5000
Series9
0 Series10
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

The below figure 3.1 depicts the trend graph of BSE SENSEX for the last 67 quarters

along with the linear trend line. Over the last 16 years market has been growing at the

CAGR of approx. 11% which is more than the GDP growth rate. Sensex has grown 4 times

starting Aug, 2004 to Dec 2007 and seen a sharp fall during global recession between Jan,

2008 to Mar, 2009 by 50% of what it was in Dec 2007.

The graph presented above shows the number of series, which depicts thenumber of

months. As the blue series shows the number of years taken for analysing the status of the

BSE Sensex. The y-axis shows the average of sensex during that particular month and the

x-axis shows the number of years.

19
 GOLD PRICE (GP)

The table 3.2 below contains the monthly closing data of Gold Price (GP) for the last 67

quarters with 201 observations for the period starting from Jan, 2000 to Sep, 2016.

Table 3.2 – Monthly closing of Gold Price (Jan, 2000 to Sep, 2016)

Monthly Closing
Year Jan Feb March April May June July Aug Sept Oct Nov Dec
2001 12360 12806 12067 12007 12135 12872 12459 12678 12597 12387 12608 12811
2002 12271 12416 12015 12323 12575 12729 12531 12869 14024 13377 13204 13332
2003 13694 14465 14702 15080 16006 15561 14818 15161 15650 15318 15413 16648
2004 17567 16561 15891 15943 16993 16078 16368 17217 17754 17504 18232 18991
2005 18106 17906 18397 17276 17849 18196 18151 18874 19161 19305 20171 18935
2006 18428 18985 18666 18966 18130 19005 18635 19101 20860 21233 22750 23090
2007 25096 24669 25936 28925 30233 28245 29449 29014 27520 27186 28928 27972
2008 28727 29407 28762 27885 26762 26493 26874 27468 29606 31045 31046 32862
2009 36352 38874 37452 35288 37604 40024 39083 36597 41540 36135 40794 42374
2010 44945 48685 46498 44193 45960 44767 45025 46652 47900 48843 54690 50606
2011 49794 51095 50080 52311 55985 57777 54247 58611 58730 59829 63481 62846
2012 60922 63898 64172 67892 69211 67299 71963 83511 79339 83852 91149 81303
2013 86232 86747 84696 87020 87493 89252 90207 91697 93675 92473 93885 90814
2014 88548 86422 86864 79142 78768 70834 79928 92151 83045 81366 78299 74504
2015 78381 82216 77146 77715 73892 79090 77786 78019 75131 71484 73395 76125
2016 78053 75031 74283 74963 76090 74569 70427 75449 74653 74646 70780 70125
2017 75466 84498 81917 85277 81556 89144 89893 87680 88052
Source: www.YCharts.com for Gold Prices per ounce in INR

As mentioned in table 3.1 the Monthly closing of 16 years of BSE Sensex. This table

shows the monthly closing of Gold Prices ofthose 16 years. This helps in evaluating the

relationship between BSE Sensex and the Gold Prices.

20
4.1. DESCRIPTIVE STATISTICS ANALYSIS
In this study, data was collected for variables BSE – Sensex and Gold Price per Ounce

(GP) for the duration of Jan 2000 to Sep 2016. The table 4.1 below depicts the descriptive

statistics analysis of 201 monthly closing of BSE Sensex and Gold Price (GP). The

recorded skewness for BSE SENSEX is of 0.2 and Gold Price (GP) is of 0.3 as per

Hilderand (1986) absolute values of skewness above 0.2 indicates great skewness. The

recorded kurtosis for BSE SENSEX is -1.1 and Gold Price (GP) is -1.5 which is normal

according to George, D., & Mallery, M. (2010) values for asymmetry and kurtosis between

-2 and +2 are considered acceptable in order to prove normal univariate distribution.

Table 4.1: Descriptive Statistics Analysis

Descriptive Analysis SENSEX Gold Prices

Mean 13690.6 45017.3
Standard Error 566.4 1986.3
Median 14564.5 37452
Mode
Standard Deviation 8029.7 28161.1
Kurtosis -1.1 -1.5
Skewness 0.2 0.3
Range 26549.9 81878
Minimum 2811.6 12007
Maximum 29361.5 93885
Confidence Level (95.0%) 1116.8 3916.8
CV 58.7 45017.3

21
The figure 4.1 below depicts the trend analysis based on two variables one dependent

variable i.e. BSE SENSEX and another one independent variable i.e. Gold Price (GP). The

graph below represents on one axis monthly closing BSE SENSEX and on another axis

monthly closing GP per ounce. There have been multiple instances of inverse relationship

in the below 201 observations which has been represented with dotted arrows. The red

dotted arrow line represents that whenever SENSEX has moved up gold per ounce have

gone down and become cheaper represented with brown arrow showing downward or vice

versa.

Fig 4.1: Trend Analysis of Gold Price and BSE Sensex

Chart Title
100000
80000
60000
Axis Title

40000
Series1
20000
Series2
0
-20000

22
4.2. CORRELATION METRICS

The table 4.2 below depicts the summary of correlation analysis that shows the relevance

and relationship Gold Price and BSE – Sensex two variables. In case of gold prices, as the

Sensex rises the price of gold decreases. Increasing gold prices are a traditional indicator of

a recession or a downturn in an economy (Dutta et al., 2014). From the correlation analysis

between Sensex and Gold, p=0.8719, in this research study, the high correlation in

comparison to the literature relevance and empirical reports. In an empirical study by Najaf

& Najaf, (2016); it was found that there was no long run connection between securities

exchange of India and gold markets. It was found that with 94% change in stock exchange

the change in gold price is mere 9% indicating very low relationship between the two

variables, gold and Sensex. However, in another research by Dutta et al., (2014); found

that the impact of exchange rates and gold price on Sensex in the long period. The

researcher however contradicts that there is a very strong relationship between the gold

price and its influence over stock exchange. Mukhuti, 2013; investigated the

interrelationship between stock market index and gold price. The researcher’s finding

however is congruent to the current study as there was a steady relationship between the

two stock market indices and gold price in India from the findings of Mukhuti & Bhunia,

(2013). Therefore, in the long-run gold price in India is significantly influenced by Indian

stock market indices and thereby Sensex is influenced. Thus, from the current correlation

analysis and relevance from the literatures it is evident that there is a strong relationship

between Sensex and gold prices.

23
 Table 4.2: Summary of correlation statistics

Correlation Sensex Gold Price

BSE Sensex 1

Gold Price (GP) 0.8719* 1

4.3. REGRESSION ANALYSIS

From the summaries for the significance value was found for Gold Price (GP) is zero. The

p-value for Gold Price (GP) shows the hypothesis that the coefficient is equivalent to zero.

A low p-esteem (< 0.05) shows that the invalid and can be rejected. Thus, from the

analysis of p-value data in table 4.3, it can be interpreted that both the independent variable

had significant values with .000, However, since the regression significance is evaluated

on the basis of p-value, the alternative hypothesis is accepted while the null hypothesis is

rejected.

Table 4.3: Regressions Model

Linear Regression
Source SS Df MS Number of obs 0 201
F(5,195) 0 491.35
Model 11947000000 5 23894000000 Prob>F 0 0
Residual 948286503 195 4863007.71 R-squared 0 0.9265
Adj R-squared 0 0.9246
Total 12895000000 200 64477175.8 Root MSE 0 2205.2
Summary of Regression
Sensex Coeficient Std. Err. T P>T 95% Conf Interval
Gold
Prices -0.1077265 0.018469 -5.83 0 -0.14 -0.0713
-78915.51 3965.375 -19.9 0 ##### -71095

24
5. CONCLUSION

Study has found that the microeconomic variable Gold Price had a positive impact on

Sensex. Based on correlation and regression, individually it has been found that the

variable Gold Price showed significance to influencing Sensex. With this the variable

rejects the null hypothesis. Thus, it can be implicated that the Gold Price has a positive

impact and relation to the Sensex.

Null Hypothesis Alternate Hypothesis

Gold Price Per ounce on INR There is no such relationship There is significant

between Gold Prices and relationship between Gold

Indian Stock Market. Prices and Indian Stock

Market. (True)
(False)

This project has attempted to study the relationship of Sensex and Gold Prices. The

collected has been processed with the help of correlation and regression. The data has been

collected from Jan 2000 to Dec 2016. This explains the current time scenario of the sensex.

From this data analyses we can explain that the sensex and gold prices have inverse

relationship. This can be explained as when the prices in BSE Sensex falls, the gold prices

increased in the market.

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Here we can say that during the uncertain conditions in the economy , people have chosen

the less risky investment gold . This may be due to hedging were the risks of staying

invested in one asset will be decreased by investing the same money into risk less assets.

As gold has been a preferred investment as it is the one of the oldest andreliable form of

investment.

This study shows that during the period of economic stability the sensexkept gaining points

but the gold price movement was not that aggressive. As theeconomy started becoming

weaker the gold became the more preferred and reliableinvestment and the

sensex began to lose points.

We can conclude that during the economic stability in the market people seeboth gold and

sensex differently and the is no relationship between the movements of price and points.

But when the economy is not stable the safe metal gold is preferredto limit the risk

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 ssReference and Bibliography

 Dutta, S., Ghosh, D., & Samanta, S. (2014). Multifractal detrended cross-
correlation analysis of gold price and SENSEX.

 Physica A: Statistical Mechanics and Its Applications, 413, 195–204.

https://doi.org/10.1016/j.physa.2014.06.081

 Sireesha, P. B. (2013), “Effect of Select Macro Economic Variables on Stock

Returns in India”, International Journal of Marketing, Financial Services &

Management Research, Vol. 2, No. 6, pp. 197-209.

 Najaf, R., & Najaf, K. (2016). Impact of oil prices on the stock exchange of
Pakistan and Malaysia. International Journal of Academic Research in Management

and Business, 1(1), 88–97. https://doi.org/10.4172/2168-9601.1000193

 Venkatraja, B. (2014), “Impact Of Macroeconomic Variables On Stock Market

Performance In India: An Empirical Analysis”, International Journal of Business

Quantitative Economics and Applied Management Research, Vol. 1, No. 6, pp. 71-

85.

 Bhunia, A., & Mukhuti, S. (2013). The impact of domestic gold price on stock
price indices-An empirical study of Indian stock exchanges. Universal Journal of

Marketing and Business Research, 2(2), 2315–5000.

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