Surviving Coronavirus scare: A journey of stock market amid a slowdown in Indian Economy

Sinha, Pankaj and Sawaliya, Priya and Sinha, Prateek (2020): Surviving Coronavirus scare: A journey of stock market amid a slowdown in Indian Economy.

Abstract

The present study analyzes the journey of the Indian stock market during the period of 2019 to 2020. With the help of this study, we try to solve the puzzle that why the stock market is rising amid the slowdown in the Indian economy. Further, we also examine why only the Large-cap stocks were rising, whereas Small-cap and Mid-cap stocks declined. The study also examines the impact of Coronavirus pandemic on the Indian stock market with the help of event study from the period 22nd January 2020 to 8th June 2020. We have analyzed the impact of this Pandemic on the constituents of the BSE Sensex 30 index. We have also examined the performance of stock markets of top ten countries severely affected by COVID-19. We find the reasons behind this anomaly that why the Sensex and Nifty were rising is that investors are forward-looking and want to invest only in the large corporations amid the slowdown in the economy. The reason for this optimism is the number of measures the government has announced to revive the economy. As a result, these securities become very expensive and hence, Sensex and Nifty have gone up. Hence, the stock markets were rising purely on the sentiments of the investors and the expectation of a better future. The extent of the spread of COVID-19, combined with a high death rate, has resulted in an extraordinary situation of lockdowns being enforced across the world. Therefore, there is a lot of anxiety and fear among them that has resulted in sell-offs as everybody demands safer assets such as gold and the government 10-year treasury bills. The stock markets of ten countries which we analyzed in this study are also negatively affected by COVID-19, especially till the last week of March. With the help of event study, we concluded that the Indian stock market is negatively affected by COVID-19.

• Item Type: MPRA Paper
• Language: English
• Keywords: stock market, slowdown, Indian economy, COVID-19, event study
• Subjects: G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading; G - Financial Economics > G1 - General Financial Markets > G17 - Financial Forecasting and Simulation

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