IS CRYPTO MARKET IS A SYSTEMATIC RISK TO INDIAN STOCK MARKET? - AN EMPIRICAL ANALYSIS.

Abstract

This study attempts to examine the relationship between the Indian stock market and the crypto market. We considered one of the world’s prominent stock exchanges i.e., the National Stock Exchange of India’s popular index—NIFTY 50—to represent the stock market; and six major cryptocurrencies in the market such as Bitcoin, Ethereum, Tether, Cardano, Binance Coin, and Dogecoin. We have used Granger causality, Pearson correlation and  multivariate regression to establish the relationship between the stock market index and the cryptocurrencies. We have also investigated whether the crypto market act as a systematic risk to the Indian stock market or not. The study has found that cryptocurrencies have a high rate of return and volatility compared to the stock market. We have also found only a very low positive correlation between the NSE NIFTY 50 and cryptocurrencies. Another relevant observation is that there is no Granger causality between the NSE NIFTY 50 and the crypto market. Finally, all the results indicates that the crypto market is not a systematic risk to Indian stock market and there is no significant relationship between Indian stock market and crypto market. Investors of Indian stock market can take decision without considering ups and downs of crypto market.