Sustainable invesment challenges in emerging markets: Case of India’s NIFTY100ESG indices
DOI:
https://doi.org/10.12928/optimum.v15i1.12706Keywords:
NIFTY100ESG indices, Sustainable invesment, Macroeconomic variables, Emerging marketsAbstract
The NIFTY100 ESG Indices in India are influenced by macroeconomic factors such as currency exchange rates, economic policy uncertainty (EPU), CBOE VIX, and global commodity prices like gold and crude oil. Despite the increasing relevance of sustainable investing, limited research has explored how these factors impact ESG-focused indices in emerging markets. This study examines their short- and long-term effects using the Autoregressive Distributed Lag (ARDL) model, analyzing monthly data from January 2019 to December 2024. The findings indicate that in the short term, CBOE VIX, exchange rates, and gold prices negatively affect the index, while gold prices have a positive impact in the long run. Meanwhile, exchange rates, EPU, and crude oil prices show no significant influence. By specifically focusing on India’s ESG investments, this research fills a crucial gap in the literature, moving beyond conventional stock market studies. The results emphasize the importance of strong economic policies and risk management strategies to enhance market stability and promote sustainable investments, offering valuable insights for investors, policymakers, and regulators in an evolving financial landscape.
References
Abdullah, A. M., & Aman, A. (2024). Energy Prices and Their Impact on US Stock Indices: A Wavelet-based Quantile-on-Quantile Regression Approach. International Journal of Energy Economics and Policy, 14(3), 216-234. https://doi.org/10.32479/ijeep.15645
Al-Thaqeb, S. A., & Algharabali, B. G. (2019). Economic policy uncertainty: A literature review. Journal of Economic Asymmetries, 20(July), e00133. https://doi.org/10.1016/j.jeca.2019.e00133
Alexander, R., & Al-Malkawi, H. A. (2023). The Impact of Macroeconomic Factors on the Nifty Auto Index. In Lecture Notes in Civil Engineering: Vol. 320 LNCE. Springer Nature Switzerland. https://doi.org/10.1007/978-3-031-27462-6_2
Atri, H., Teka, H., & Kouki, S. (2023). Does US full vaccination against COVID-19 immunize correspondingly S&P500 index: Evidence from the NARDL approach. Heliyon, 9(4), e15332. https://doi.org/10.1016/j.heliyon.2023.e15332
Bagh, T., Waheed, A., Khan, M. A., & Naseer, M. M. (2023). Effect of Economic Policy Uncertainty on China's Stock Price Index: A Comprehensive Analysis Using Wavelet Coherence Approach. SAGE Open, 13(4), 1-13. https://doi.org/10.1177/21582440231210368
Baker, S. R., Nicholas, B., & Davis, S. J. (2016). Measuring Economic Policy Uncertainty. 483, 1-38. https://doi.org/10.1093/qje/qjw024
Chellaswamy, K. P., Natchimuthu, N., & Faniband, M. (2020). Stock market sensitivity to macroeconomic factors: Evidence from China and India. Asian Economic and Financial Review, 10(2), 146-159. https://doi.org/10.18488/journal.aefr.2020.102.146.159
Chikwira, C., & Jahed, M. I. (2024). Analysis of Exchange Rate Stability on the Economic Growth Process of a Developing Country: The Case of South Africa from 2000 to 2023. Economies, 12(11). https://doi.org/10.3390/economies12110296
Daniali, S. M., Barykin, S. E., Kapustina, I. V., Khortabi, F. M., Sergeev, S. M., Kalinina, O. V., Mikhaylov, A., Veynberg, R., Zasova, L., & Senjyu, T. (2021). Predicting volatility index according to technical index and economic indicators on the basis of deep learning algorithm. Sustainability (Switzerland), 13(24), 1-14. https://doi.org/10.3390/su132414011
Darsono, S. N. A. C., Le-Dinh, T., Trong Than, N., Ha Nguyen, T. T., Keung Wong, W., & Peter Ou, J. (2023). Did Covid-19 Challenge the Volatility of the Sustainable Stock Market? an Examination of Asian Market. Journal of Eastern European and Central Asian Research, 10(7), 989-1005. https://doi.org/10.15549/jeecar.v10i7.1343
Darsono, S. N. A. C., Muttaqin, E. I., & Rahmadani, R. A. (2024). Unveiling the Nexus of Consumer Price Index , Economic Policy Uncertainty , Geopolitical Risks , and Gold Prices on Indonesian Sustainable Stock Market Performance. International Journal of Economics and Financial Issues, 14(6), 128-135. https://doi.org/10.32479/ijefi.16685
Darsono, S. N. A. C., Wong, W. K., Nguyen, T. T. H., & Wardani, D. T. K. (2022). The Economic Policy Uncertainty and Its Effect on Sustainable Investment: A Panel ARDL Approach. Journal of Risk and Financial Management, 15(6). https://doi.org/10.3390/jrfm15060254
de Oliveira, E. M., Cunha, F. A. F. de S., Palazzi, R. B., Klotzle, M. C., & Maçaira, P. M. (2020). On the effects of uncertainty measures on sustainability indices: An empirical investigation in a nonlinear framework. International Review of Financial Analysis, 70, 101505. https://doi.org/10.1016/j.irfa.2020.101505
Dempere, J., Alamash, E., & Mattos, P. (2024). Unveiling the truth: greenwashing in sustainable finance. Frontiers in Sustainability, 5(May). https://doi.org/10.3389/frsus.2024.1362051
Durmaz, N. (2024). The Effects of Policy Uncertainty on Stock Prices: Revisiting with Selected Countries. Ekonomika, 103(3), 57-69. https://doi.org/10.15388/Ekon.2024.103.3.4
Farooq, U., Alam, M. M., Subhani, B. H., Tabash, M. I., & Shamansurova, Z. (2024). Non-Linear Effects of Economic Policy Uncertainty on Green Innovation: Evidence from BRICS Countries. Sustainability (Switzerland), 16(21), 1-21. https://doi.org/10.3390/su16219529
Guo, A., Wei, H., Zhong, F., Liu, S., & Huang, C. (2020). Enterprise sustainability: Economic policy uncertainty, enterprise investment, and profitability. Sustainability (Switzerland), 12(9), 1-22. https://doi.org/10.3390/su12093735
Immanuvel, S. M., & Lazar, D. (2021). Elasticities of Gold Demand-An Empirical Analysis Using Cointegration and Error Correction Model. Arthaniti: Journal of Economic Theory and Practice, 20(2), 131-142. https://doi.org/10.1177/0976747920903118
Jain, M., Sharma, G. D., & Srivastava, M. (2019). Can sustainable investment yield better financial returns: A comparative study of ESG indices and MSCI indices. Risks, 7(1). https://doi.org/10.3390/risks7010015
Javangwe, K. Z., & Takawira, O. (2022). Exchange rate movement and stock market performance: An application of the ARDL model. Cogent Economics and Finance, 10(1). https://doi.org/10.1080/23322039.2022.2075520
Khan, T. (2024). Circular-ESG Model for Regenerative Transition. Sustainability, 16(17), 7549. https://doi.org/10.3390/su16177549
Kocmanová, A., Dočekalová, M. P., Meluzín, T., & Škapa, S. (2020). Sustainable investing model for decision makers (Based on research of manufacturing industry in the Czech Republic). Sustainability (Switzerland), 12(20), 1-27. https://doi.org/10.3390/su12208342
Kumar, S., Kumar, A., & Singh, G. (2023). Causal relationship among international crude oil, gold, exchange rate, and stock market: Fresh evidence from NARDL testing approach. International Journal of Finance and Economics, 28(1), 47-57. https://doi.org/10.1002/ijfe.2404
Kuntamalla, V. R., & Maguluri, K. J. (2022). Causal Analysis of Stock Prices and Macroeconomic Variables: Evidence From Indian Stock Market. Asian Economic and Financial Review, 12(7), 459-472. https://doi.org/10.55493/5002.v12i7.4530
Kurniawan, M. L. A., & A'yun, I. Q. (2022). Dynamic analysis on export, FDI and growth in Indonesia: An Autoregressive Distributed Lag (ARDL) model. Journal of Economics, Business, & Accountancy Ventura, 24(3), 350-362. https://doi.org/10.14414/jebav.v24i3.2717
Kurniawan, M. L. A., Khasanah, U., & Baharudin, A. (2023). Determinant of property price through the monetary variables: An ARDL approach. Jurnal Ekonomi Pembangunan: Kajian Masalah Ekonomi Dan Pembangunan, 24(1), 12-23. https://doi.org/10.23917/jep.v24i1.20588
Le, T. H., Le, A. T., & Le, H. C. (2021). The historic oil price fluctuation during the Covid-19 pandemic: What are the causes? Research in International Business and Finance, 58(October 2020), 101489. https://doi.org/10.1016/j.ribaf.2021.101489
Liao, Z., Wang, Z., & Guo, K. (2019). The dynamic evolution of the characteristics of exchange rate risks in countries along "the Belt and Road" based on network analysis. PLoS ONE, 14(9), 1-18. https://doi.org/10.1371/journal.pone.0221874
Mirza, N., Naeem, M. A., Ha Nguyen, T. T., Arfaoui, N., & Oliyide, J. A. (2023). Are sustainable investments interdependent? The international evidence. Economic Modelling, 119(November 2022), 106120. https://doi.org/10.1016/j.econmod.2022.106120
Mohanty, D., Mohapatra, A. K., Tripathy, S., & Matta, R. (2023). Nexus Between Foreign Exchange Rate and Stock Market: Evidence From India. Investment Management and Financial Innovations, 20(3), 79-90. https://doi.org/10.21511/imfi.20(3).2023.07
Mroua, M., & Trabelsi, L. (2020). Causality and dynamic relationships between exchange rate and stock market indices in BRICS countries: Panel/GMM and ARDL analyses. Journal of Economics, Finance and Administrative Science, 25(50), 395-412. https://doi.org/10.1108/JEFAS-04-2019-0054
Naeem, M. A., Yousaf, I., Karim, S., Tiwari, A. K., & Farid, S. (2023). Comparing asymmetric price efficiency in regional ESG markets before and during COVID-19. Economic Modelling, 118(October 2022), 106095. https://doi.org/10.1016/j.econmod.2022.106095
Nain, M. Z., Bhat, S. A., & Bhat, J. A. (2023). ESG investments, bear periods and adaptive resilience: evidence from India using a DBEKK‑MGARCH. Journal of Social and Economic Development, 25(s1), 5-21. https://doi.org/10.1007/s40847-023-00273-w
Nittayakamolphun, P., Bejrananda, T., & Pholkerd, P. (2024). Asymmetric Effects of Uncertainty and Commodity Markets on Sustainable Stock in Seven Emerging Markets. Journal of Risk and Financial Management, 17(4). https://doi.org/10.3390/jrfm17040155
Nkoro, E., & Uko, A. K. (2016). Autoregressive Distributed Lag (ARDL) cointegration technique: application and interpretation. Journal of Statistical and Econometric Methods, 5(3), 63-91.
Pesaran, M. H., & Shin, Y. (1999). An Autoregressive Distributed-Lag Modelling Approach to Cointegration Analysis. Econometrics and Economic Theory in the 20th Century, 371-413.
https://doi.org/10.1017/CCOL521633230.011
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326. https://doi.org/10.1002/jae.616
Sahoo, S. (2024). Harmony in diversity: Exploring connectedness and portfolio strategies among crude oil, gold, traditional and sustainable index. Resources Policy, 97(August), 105281. https://doi.org/10.1016/j.resourpol.2024.105281
Serap Vurur, N., Özdemir, L., Özen, E., & Grima, S. (2024). the Impact of Stock Prices of Polluting Energy Sources on Renewable Energy Stock Index Prices. Folia Oeconomica Stetinensia, 24(2), 344-370. https://doi.org/10.2478/foli-2024-0029
Shabbir, A., Kousar, S., & Batool, S. A. (2020). Impact of gold and oil prices on the stock market in Pakistan. Journal of Economics, Finance and Administrative Science, 25(50), 279-294.
https://doi.org/10.1108/JEFAS-04-2019-0053
Shaikh, I. (2020). Does policy uncertainty affect equity, commodity, interest rates, and currency markets? Evidence from cboe's volatility index. Journal of Business Economics and Management, 21(5), 1350-1374. https://doi.org/10.3846/jbem.2020.13164
Sharma, I., Bamba, M., Verma, B., & Verma, B. (2024). Dynamic Connectedness and Investment Strategies between Commodities and ESG Stocks: Evidence from India. Australasian Accounting, Business and Finance Journal, 18(3), 67-84. https://doi.org/10.14453/aabfj.v18i3.05
Siddiqui, S., & Roy, P. (2019). Predicting volatility and dynamic relation between stock market, exchange rate and select commodities. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 67(6), 1597-1611. https://doi.org/10.11118/actaun201967061597
Singh, N. P., & Joshi, N. (2019). Investigating Gold Investment as an Inflationary Hedge. Business Perspectives and Research, 7(1), 30-41. https://doi.org/10.1177/2278533718800178
Singhal, S., Choudhary, S., & Biswal, P. C. (2019). Return and volatility linkages among International crude oil price, gold price, exchange rate and stock markets: Evidence from Mexico. Resources Policy, 60(December 2018), 255-261. https://doi.org/10.1016/j.resourpol.2019.01.004
Tolliver, C., Fujii, H., Keeley, A. R., & Managi, S. (2021). Green Innovation and Finance in Asia. Asian Economic Policy Review, 16(1), 67-87. https://doi.org/10.1111/aepr.12320 https://doi.org/10.1111/aepr.12320
Tran, M. P. B., & Vo, D. H. (2023). Asia-Pacific stock market return and volatility in the uncertain world: Evidence from the nonlinear autoregressive distributed lag approach. PLOS ONE, 18(5 May), 1-17.
https://doi.org/10.1371/journal.pone.0285279
Vadithala, U. K., & Tadoori, G. (2021). Market Efficiency of ESG and Traditional Indices -Pre and Post COVID Analysis of NSE Indices. International Journal of Creative Research Thoughts, 9(3), 2712-2726.
Vuong, G. T. H., Nguyen, M. H., & Keung Wong, W. (2022). CBOE volatility index (VIX) and corporate market leverage. Cogent Economics and Finance, 10(1). https://doi.org/10.1080/23322039.2022.2111798
Wei, J., Hu, R., & Chen, F. (2024). The Path to Sustainable Stability: Can ESG Investing Mitigate the Spillover Effects of Risk in China's Financial Markets? Sustainability (Switzerland), 16(23), 1-25. https://doi.org/10.3390/su162310316
Wu, Y., Guo, Q., Song, J., & Ma, H. (2024). Economic Policy Uncertainty and Firm ESG Performance. Sustainability (Switzerland), 16(14), 1-18. https://doi.org/10.3390/su16145963
Downloads
Published
Issue
Section
License
Copyright (c) 2025 Susilo Nur Aji Cokro Darsono, Kyla Alifiya Syahla Luthfiya
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
