Relationship between the Rainfall Index and Stock/Agri-commodity Market Indices: Empirical Evidence from India

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Authors

  • N. Dileep
     Assistant Professor, PG Department of Commerce, MMK and SDM Mahila Mahavidyalaya, Mysuru - 570 004, Karnataka ,IN
  • G. Kotreshwar
     Professor of Commerce (Rtd), Department of Studies in Commerce, University of Mysore, Mysuru - 570 006, Karnataka ,IN

DOI:

https://doi.org/10.18311/sdmimd/2024/41924

Keywords:

Guarex Agri-Commodity Index, Rainfall Index, Rainfall Derivatives, Sensex Index, Unique Asset Class

Abstract

The rainfall, stock, and agri-commodity indices are the economic indicators for Indian economy. Therefore, research is needed to explore the complex relationship between rainfall and economic indicators and its longterm implications. Only a few studies are available on this relationship, and no study gives complete, conclusive evidence on this relationship. Therefore, the present study focused on determining whether there is any relationship between the rainfall index and stock/agri-commodity indices. This study employed the advanced statistical tools like ADF test, correlation, Granger causality test, and GARCH (1,1) model. The research utilized the monthly average rainfall index and the Sensex index from 1991 to 2020. Similarly, the study employed the monthly average Guarex agri-commodity index for the period from 2018 to 2020. The study found that there is no relationship and causality relationship between the rainfall index and the Sensex index. The GARCH (1,1) model shows that the rainfall index has no impact on the volatility of the Sensex index. There is a moderately negative correlation between the rainfall index and the Guarex index, and rainfall affects the volatility of the Guarex index. This shows that the rainfall index can be a distinct asset class that can be traded through rainfall derivatives. In order to launch rainfall derivatives in India, NCDEX and Skeymet Industries have already approached the SEBI for permission.

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Published

2024-03-28

How to Cite

Dileep, N., & Kotreshwar, G. (2024). Relationship between the Rainfall Index and Stock/Agri-commodity Market Indices: Empirical Evidence from India. SDMIMD Journal of Management, 15, 77–85. https://doi.org/10.18311/sdmimd/2024/41924

Issue

Volume 15, Special Issue, 2024

Section

Articles

License

Copyright (c) 2024 N. Dileep, G. Kotreshwar

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

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