Published Online:July 2025
Product Name:The IUP Journal of Accounting Research & Audit Practices
Product Type:Article
Product Code:IJARAP150725
DOI:10.71329/IUPJARAP/2025.24.3.318-330
Author Name:Abhay Kumar, Tirth Govani and Samaksh Bagaria
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:318-330
The paper examines the relationship between selected Indian stocks (Reliance Industries, TCS and HDFC Bank) and cryptocurrencies (Bitcoin, Ether and XRP) through analysis of volume-weighted returns. Statistical tests demonstrate minimal correlation between Indian stock returns and cryptocurrency performance, indicating substantial potential for portfolio diversification across these asset classes. Despite limited correlation, strong evidence of Granger causality emerges, highlighting an asymmetric information flow from Indian stocks to cryptocurrency prices. TCS exhibits particularly strong predictive power over cryptocurrency movements, suggesting India’s technology sector may serve as a leading indicator for digital asset valuation. Cointegration tests confirm a long-term equilibrium relationship between these markets, indicating that while short-term price movements diverge, underlying economic factors drive interconnected movements over extended time horizons. This established relationship provides a foundation for developing pairs trading strategies that capitalize on temporary deviations from equilibrium. Volatility analysis shows both asset classes exhibit mean-reverting tendencies, though cryptocurrencies demonstrate significantly higher volatility than Indian stocks. This volatility differential requires careful consideration in risk management frameworks and portfolio allocation decisions. This study contributes to the understanding of cross-market dynamics and offers practical applications for investment strategy development.
The global stock market is well-established with a market capitalization of over $100 tn, whereas as of 2024, the total market cap of the cryptocurrency market fluctuated between $1.5 and 2.5 tn, significantly smaller than the stock market. Bitcoin and Ether dominate the crypto market.