Investigation of Dynamics of Macroeconomy and Commodity Mutual Funds: Empirical Evidence from India

Abstract

Researchers discuss the effect of macroeconomics on the stock market but usually, effects on portfolios like the mutual funds are not very popular. In this research, an attempt was made to study the same. A longitudinal, exploratory study was performed taking three year daily (net asset value) NAVs of 41 mutual funds belonging to two categories (gold funds and energy funds) and series of 9 macroeconomic variables and analysed using time series methods to judge and highlight their impact on the chosen funds. Different macroeconomic variables were found to affect the two categories of funds differently. Investment in energy funds increased whenever there was an increase in money supply. Interest rates had a positive impact on gold mutual fund net asset values. Own fund information was found to have the major impact when excited with one standard deviation shock. The causality between various mutual funds and macroeconomic variables was established. The study highlighted the need to understand the global scenario by both the investor and the mutual fund manager. Since the macroeconomic variables interplay and affect the mutual funds, their understanding would help in stitching more profitable schemes.