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Impact of Covid-19 on the Stock Market and Corporate Firms in India

In: Exploring What Drives Indian Stock Market During Covid-19

Author

Listed:
  • Indrani Chakraborty

    (Institute of Development Studies Kolkata (IDSK))

Abstract

Covid-19 was declared by WHO as a ‘pandemic’ on 11 March 2020, and the very next day the Indian stock market crashed heavily. This was primarily due to net outflows of foreign institutional investment (FII). While most of the sectors would go through adverse experience due to Covid-19, there are sectors where the negative impact could be low due to low negative demand shock or a strong balance sheet of firms. In this paper, we highlight the possible consequences of the pandemic. We contend that the direction of sector-wise movement in FII flow signals which sectors will grow or shrink in the coming years. Analysing the daily data from 2 March 2020 to 22 May 2020, we observe that FII flow ‘Granger causes’ stock market performance, measured by the closing price. Higher profitability in the past years, better growth opportunities in the stock market and being a stand-alone firm have a favourable impact on stock price reactions to Covid-19 shocks and hence they make the firms with these characteristics more resilient.

Suggested Citation

  • Indrani Chakraborty, 2023. "Impact of Covid-19 on the Stock Market and Corporate Firms in India," SpringerBriefs in Economics, in: Exploring What Drives Indian Stock Market During Covid-19, chapter 0, pages 17-33, Springer.
    • Handle: RePEc:spr:spbchp:978-981-19-8001-5_2
    DOI: 10.1007/978-981-19-8001-5_2
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