The Moderating Role of Geopolitical Events and Fiscal Policy in the Relationship Between Macroeconomic Variables and the Nifty Metal Index

Abstract

The dynamic interplay between macroeconomic fundamentals and sectoral stock indices has gained renewed relevance as global markets increasingly respond to geopolitical tensions and fiscal interventions. In the Indian context, the Nifty Metal Index has exhibited heightened sensitivity to fluctuations in growth indicators, monetary conditions, commodity cycles, and global uncertainties, positioning it as a strategic benchmark for analysing macro-financial transmission. This study investigates the moderating role of geopolitical events and fiscal policy in altering the relationship between key macroeconomic variables—GDP growth, inflation, interest rates, exchange rates, and commodity prices—and the performance of the Nifty Metal Index. By integrating time-series modelling with a multi-layered moderating framework, the research explores how exogenous shocks and policy responses reshape both short- and long-term stock behaviour in the metal sector. The analysis aims to uncover whether geopolitical disruptions amplify market volatility and whether counter-cyclical fiscal interventions mitigate adverse macroeconomic pressures. The study’s empirical model advances understanding of sector-specific market sensitivities and provides a robust explanatory mechanism for differential index movements across varying policy and geopolitical regimes. The findings are expected to contribute to financial economics by identifying moderating asymmetries, strengthening predictive insights for investors, guiding strategic corporate responses within the metal industry, and offering policy-relevant evidence for stabilising sectoral performance during geopolitical and fiscal transitions.