Volatility Spillovers and Correlation Dynamics between Bitcoin and Indian Equity Index: Evidence from DCC-GARCH and Diebold-Yilmaz Analysis

Aparajita RB Singh; Arin SN

doi:10.36948/ijfmr.2025.v07i06.58029

Volatility Spillovers and Correlation Dynamics between Bitcoin and Indian Equity Index: Evidence from DCC-GARCH and Diebold-Yilmaz Analysis

Author(s)	Ms. Aparajita RB Singh, Mr. Arin SN
Country	India
Abstract	This study investigates the volatility dynamics, return causality, and connectedness between Bitcoin (BTC-INR) and the Indian equity market index (Nifty 50) using daily data from April 2015 to March 2025. Comprehensive econometric framework such as descriptive statistics, stationarity, and causality tests, GARCH (1,1) modelling, Dynamic Conditional Correlation (DCC-GARCH), and the Diebold–Yilmaz spillover index is employed, which provides insights into the relationship between cryptocurrency and equity markets in India. The results indicate that BTC and Nifty 50 returns are stationary and exhibit non-normal distributions with volatility clustering. Granger causality tests reveal unidirectional causality from BTC to Nifty 50, suggesting the predictive influence of cryptocurrency on Indian equities. The GARCH (1,1) estimates show that BTC volatility is more sensitive to new shocks, while Nifty 50 volatility is more persistent, confirming distinct volatility structures across the two assets. DCC-GARCH results demonstrate that correlations are generally weak and time-varying, with temporary increases during global financial stress such as the COVID-19 pandemic. The spillover analysis reports a very low Total Connectedness Index (0.52%), confirming minimal return transmission between the two markets. These outcomes support the hypothesis that Bitcoin (BTC-INR) and Nifty 50 Index exhibit weak correlation and limited volatility spillovers under normal conditions, with short-lived co-movements emerging during systemic events. The findings indicate that Bitcoin might serve as a viable diversification tool in Indian portfolios, and its limited connectedness indicates toward little systemic risk to the domestic financial system.
Keywords	Bitcoin (BTC), Nifty 50, Volatility Dynamics, GARCH (1,1), DCC-GARCH, Diebold–Yilmaz Spillover Index, Portfolio Diversification
Published In	Volume 7, Issue 6, November-December 2025
Published On	2025-11-13
DOI	https://doi.org/10.36948/ijfmr.2025.v07i06.58029

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Volatility Spillovers and Correlation Dynamics between Bitcoin and Indian Equity Index: Evidence from DCC-GARCH and Diebold-Yilmaz Analysis

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