Commodities and Sectoral Volatility: A Post-COVID Analysis of GOLD and OIL Futures in India

This study examines the volatility and hedging effectiveness of commodities, specifically GOLD and OIL, on the Indian stock market, focusing on both aggregate and sectoral indices. Data has been collected from 1 Jan 2021 to 31 Dec 2024 to cover the post-COVID period. Utilising the Asymmetric Dynamic Conditional Correlation Generalized Autoregressive Conditional Heteroskedasticity (ADCC-GARCH) model, we analyse the volatility spillovers and time-varying correlations between commodity and stock market returns. The analysis of spillover connectedness reveals that both commodities exhibit limited and inconsistent hedging potential. GOLD demonstrates low and stable spillovers with most sectors, indicating its diminished role as a reliable safe-haven asset in Indian markets. OIL shows relatively higher but volatile spillover effects, particularly with sectors closely tied to energy and industrial activities, reflecting its dependence on external economic and geopolitical factors. The originality of this study lies in uncovering the nuanced, sector-specific interactions between GOLD, OIL, and the Indian stock market, emphasising the need to explore alternative hedging mechanisms or diversified approaches to risk management in the post-COVID recovery phase.