An Event study on the Impact of Demonetization on the Spot and Futures Returns of Commodities Traded in MCX.

  • Perumalraja. R. Department of Commerce School of Management Pondicherry University
  • Velmurugan PS Department of Commerce School of Management Pondicherry University
  • Rinku Champramary Department of Commerce School of Management Pondicherry University
Keywords: Demonetization, commodity market, event study, MCX, Average Abnormal Return.


This papers tries to contemplate the effect of demonetization on the futures and spot prices of Agri, Base metal, Bullion and Energy commodities. The study reveals that soon after the demonetization, market average return got increased in case of agri. and energy index. But decrease in market return could be observed in case of metal index. Overall, impact of demonetization is observed in spot market for all the commodities considered for the study. Whereas in the futures market, though there is an effect, it is at minimal level. Which may be due to prudent regulatory policies adopted by MCX commodity exchange with respect to futures market. The study shows that there is a significant impact in spot market for all the commodities for the short period of time. Later, the effect got reduced over long period. In case of Agri return and Bullion return, AAR got reduced after demonetization. In case of spot return of bullion and base metal during pre and post event, the average of AAR for the 10th and 25th day experienced both positive and negative impact. But 50 days after the event no impact is observed and it is almost similar to pre event period. In case of futures market also, in long term (50 days) the AAR is less compared short term (5 days), which means that only in short term there is an impact. In case of bullion and base metals the average AAR got almost similar with the pre and post event in the long term. Overall in the case of bullion and base metals in both spot and futures there is no impact of demonetization in long run.


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