Universal Journal of Marketing and Business Research (ISSN: 2315-5000) Vol. 2(2) pp. 035-043, May, 2013 Available online http://www.universalresearchjournals.org/ujmbr Copyright © 2013 Transnational Research Journals Full Length Research Paper The impact of domestic gold price on stock price indices-An empirical study of Indian stock exchanges Amalendu Bhunia 1 and Somnath Mukhuti 2 1 Associate Professor, Department of Commerce, University of Kalyani, West Bengal, India 2 Research Scholar, Department. of Commerce, CMJ University Meghalaya Accepted 29 April, 2013 The present research paper examines the impact of domestic gold price on stock price indices in India for the period for the period from 2 nd January, 1991 to 10 th August, 2012 using appropriate statistics, unit root test and Granger causality test. The domestic gold price in India is eternally escalating in consequence of its intense domestic demand on account of protection, liquidity along with spreader portfolio. It give the impression of being at the remarkable data brings to the plane that when the stock market crumples or when the dollar worsens, gold prolongs to be a safe haven investment because gold prices increase in such situations. The study is based on secondary data obtained from World Gold Council database and BSE and NSE database. Unit root test indicates that time series are not stationary at levels and the selected time series are stationary at 1st difference. Granger causality test illustrate that no causality exists between nifty and gold price, gold price and sensex and nifty and sensex and bidirectional causality exists between gold price and nifty, sensex and gold price and sensex and nifty. Keywords: Gold Price, Sensex, Nifty, India, Correlation, Multiple regression, ADF and PP unit root test, Granger causality test INTRODUCTION The study of the capital market of a country in terms of a wide range of macro-economic and financial variables has been the area under discussion of many researches during the last two decades. Empirical studies make known that when financial deregulation comes to pass, the stock markets of a country become more sensitive to both domestic and peripheral factors and one of these factors is the price of gold. Historical practices give an idea about that in countries in period of stock market slump, the gold for perpetuity trends higher (Neda Bashiri, 2011). The domestic gold price in India is continually ever-increasing on account of its heavy domestic demand as a consequence of security, liquidity and diversified portfolio. A look at the historic data brings to the surface that when the stock market collapses or when the dollar deteriorates, gold continues to be a safe haven investment because gold prices rise in such circumstances (Gaur and Bansal, 2010). This paper *Corresponding author Email: bhunia.amalendu@gmail.com explores the impact of domestic gold price on stock price indices in India. In other words, the plan of this paper is to observe the causal relationships between the gold price and stock market in India. Problem statement The global economic disorder is expected to goad improbability in gold prices that has already made it a dodgy asset for investors. Investment demand will return no more than when there are a few transparencies. Gold prices have been on the mount for the past several months and the hot-blooded state of affairs in global markets had helped the precious metal to gain handsomely. Conversely, the coming days will see huge funds moving from gold to sensex and nifty. The domestic gold prices have crowned in India for the first time, breaks all time record. In view of that most stockists are looking to smash their share of the precious metal, in consequence pushing the prices skywards and no