Impact of COVID-19 on the Performance of Indian Stock Market: An Empirical Analysis

Manu K. S. and A. Shivakanth Shetty

Jindal Journal of Business Research, 2022, vol. 11, issue 2, 175-186

Abstract: The outbreak of COVID-19 epidemic had not only brought destruction to the human lives but also destabilized the financial markets across the world. Although there were some studies conducted on the impact of COVID-19 on the financial markets in the developed economies, very few studies were conducted on the developing economies like India. Hence, this study intends to measure the impact of COVID-19 on the Indian stock market, especially on NIFTY50, and all the major sectorial indices of National Stock Exchange (NSE). The study also makes an attempt to analyze the impact of COVID-19 on the Indian stock market in various time periods (lockdown, pre-lockdown, and full sample time periods). For this purpose, the researchers have used EGARCH and regression models to measure the sectoral impact of COVID-19 on NIFTY. The study finds asymmetrical reactions on positive and negative shocks in the Indian stock market. The β 2 coefficient, which explains asymmetric volatility, is significant and positive for FMCG, realty, oil and gas, and consumer durables, suggesting the presence of asymmetric effect, but has no leverage effect. It implies that positive news has greater effects on volatility than negative news. In other words, investors are more prone to positive shocks than negative shocks with the same magnitude. While β 2 is found to be significant and negative for NIFTY, bank, information technology, and financial services, which clearly depicts the presence of leverage effect. It suggests the presence of asymmetrical reactions on unfavorable shocks in these indices.

Keywords: COVID-19; stock market; sectoral indices; volatility; NIFTY and asymmetric effect (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:sae:jjlobr:v:11:y:2022:i:2:p:175-186

DOI: 10.1177/22786821221127734

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