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

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  • Sinha, Pankaj
  • Sawaliya, Priya
  • Sinha, Prateek

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.

Suggested Citation

  • Sinha, Pankaj & Sawaliya, Priya & Sinha, Prateek, 2020. "Surviving Coronavirus scare: A journey of stock market amid a slowdown in Indian Economy," MPRA Paper 103902, University Library of Munich, Germany, revised 20 Jun 2020.
    • Handle: RePEc:pra:mprapa:103902
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    References listed on IDEAS

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    3. Srinivas Nippani & Kenneth Washer, 2004. "SARS: a non-event for affected countries' stock markets?," Applied Financial Economics, Taylor & Francis Journals, vol. 14(15), pages 1105-1110.
    4. Yi-Hsien Wang & Fu-Ju Yang & Li-Je Chen, 2013. "An investor's perspective on infectious diseases and their influence on market behavior," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 14(sup1), pages 112-127, June.
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    Cited by:

    1. Kumar, Sanjeev & Jain, Reetika & Narain, & Balli, Faruk & Billah, Mabruk, 2023. "Interconnectivity and investment strategies among commodity prices, cryptocurrencies, and G-20 capital markets: A comparative analysis during COVID-19 and Russian-Ukraine war," International Review of Economics & Finance, Elsevier, vol. 88(C), pages 547-593.
    2. Goswami, Binoy & Mandal, Raju & Nath, Hiranya K., 2021. "Covid-19 pandemic and economic performances of the states in India," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 461-479.
    3. Bashir Ahmad Joo & Zahida Farooq, 2022. "Testing the impact of COVID-19 on trading behavior of the investors: An empirical evidence from Indian Stock Market," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 13(3), pages 21-29, September.

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    More about this item

    Keywords

    stock market; slowdown; Indian economy; COVID-19; event study;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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