Ajay Pethanee, Jagdish Changani
Purpose
-The purpose of this paper is to examine the impact of COVID-19 on NSE sectoral
indices.
Design/methodology/approach -The performance of the stock market indices is
evaluated using the event study methodology. The estimation window (-158, -29)
comprises of 130 days and used to estimate the abnormal returns pre and post
COVID-19 outbreak. We divided the whole event window into four small event
windows such as short event window (0, 9), lockdown phase 1 (10, 20), lockdown
phase 2 (21, 32), lockdown phase 3 (33, 39).
Findings -Our
results of the pre-event window and short event window support the negative
impact of COVID-19 outbreak on stock market indices’ performance. The COVID-19
outbreak hurts the sentiments of investors and increase the investment fear
that causes panic selling among investors. The results of event windows lockdown
phase 1 and phase 2 reveal that the indices outperform in these phases which
suggests that the stock market welcomes the implementation of a nationwide
lockdown to prevent the outbreak of coronavirus. In the great uncertainty of
COVID-19 outbreak and its associated financial and non-financial losses
increase the high volatility in the stock markets. Therefore, stock market
indices underperform in lockdown phase 3 and phase 4. Finally, this study is an
evident that the COVID-19 pandemic badly affected the performance of all
sectoral indices.
Originality/value–To the best of authors’ knowledge, this paper is one of the first
papers of its kind which examines the impact of COVID-19 outbreak on stock
market sector-wise indices in India.
Research
limitations/implications– In the great uncertainty of the COVID-19 outbreak, stock market
regulators and the central bank could intervene to revive the confidence of
stock market participants. Findings of the study suggest that investors could
adapt the long term investment strategy in weaken market conditions and the
response would be to buy the stocks. Future researchers could examine the herd
behavior in the stock market participants in the pandemic conditions.
COVID-19, Pandemic, Stock market, Event
study, Lockdown.
VOL.14, ISSUE No.1, March 2022