Are Carbon-Efficient Equities Insulated from Oil Shocks? Evidence from an Indian VARX Model with Exogenous Currency Controls

This paper analyzes the viability of Indian equity markets in response to global energy supply shocks. This study attempts to correct the missing-variable bias in earlier literature by using the USD-to-INR exchange rate as an exogenous explanatory variable. This will help determine the intricate synthetic relationship between Brent Crude Oil Returns and the carbon-efficient S&P BSE GREENEX. Vector Autoregressive with exogenous variables (VARX) models are employed to analyze the effects of structural shocks to Brent Crude Oil prices on the S&P BSE GREENEX. The empirical results found that global oil price shocks might immediately affect green equity values in India. Even without foreign currency changes, the Indian Green Exchange Index (GREENEX) maintains its long-term values, showing structural resilience. Institutional investors and Indian financial authorities, such as SEBI and the Reserve Bank of India, gain better risk-management insights amid international energy crises from this information. It also shows that carbon-efficient standards can hedge inflation induced by foreign import supply chain interruptions.