Currency fluctuations and stock market dynamics: insights from India’s metaverse industry based on time series models

Purpose BRICS countries are close allies of each other for economic and social development as they are interconnected and interdependent on each other in advancing economic and social development due to their interconnectedness and interdependence. This study aims to check the impact of currency fluctuations of BRICS countries on Indian stock market especially on metaverse stocks. Design/methodology/approach The study covers the period from March 31, 2021 to December 31, 2023, incorporating 679 observations of 13 metaverse stocks and the currencies of BRICS nations. To analyze the impact, the study uses econometric models, including the Johansen co-integration model, Vector Error Correction Model (VECM) and Impulse-Response function, to examine the relationships between the variables. Findings The research findings highlight the relationship between metaverse stocks and the currencies of BRICS nations. The trace statistics for all variables surpass the critical value of 0.05, confirming significant relationship among them. Moreover, the results from the VECM demonstrate a statistically significant link between metaverse stocks and the four selected BRICS currencies, indicating that exchange rate fluctuations directly influence the stock returns of metaverse-related companies. Additionally, the Impulse-Response analysis reveals that changes in currency values trigger both positive and negative responses in stock performance. Research limitations/implications The study uses a data set comprising 679 observations and four international currencies analyzed through co-integration and VECM models. Future research could expand the scope by incorporating a larger data set, additional currencies and alternative analytical tools to provide deeper insights. Practical implications Considering the strong connection between currency volatility and stock returns in the metaverse sector, Indian policymakers could explore the development of more robust financial instruments to help companies in this space manage exchange rate risks effectively. Originality/value The study stands out for its originality by being among the pioneering studies to explore the linkage between stock market dynamics and economic parameters within the emerging metaverse industry. It contributes significantly to the academic discourse on technological advancements and financial markets, offering valuable insights for investors, policymakers and future researchers in this nascent yet impactful domain.