Analyzing Time-Frequency Relations between Agricultural Commodities and Equity Index in India during Covid-19 Pandemic

Abstract

The study examines the interdependence between the returns of Nifty 50 Equity Index and Agricultural Commodities cotton, mentha oil, guar seed, jeera, turmeric and coriander over a period of time. By applying wavelet analysis, the interdependence of agricultural commodities and equity index during the COVID-19 pandemic, identified periods of both strong and weak correlations between these markets. It is critical to note that the reasons for the link between agricultural commodities and equity indexes during COVID-19 pandemic may vary according to market conditions, regional considerations and other contextual factors. According to this study, Nifty 50 has higher co-movements with MCX Cotton, MCX Mentha Oil, and NCDEX Turmeric and lower co-movements with NCDEX Guar seed, NCDEX Jeera and NCDEX Coriander. The low coherence intervals indicate the ability for commodities investments to diversify in the face of a pandemic such as Covid-19. The observed trends by commodity category revealed their potential utility in the development of cross-asset hedge strategies. Thus, combining commodities and stocks increases performance over a variety of investment horizons.. KEYWORDS :Commodities market, Equity market, Co-movements, Wavelet analysis, Covid-19.