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

From: Jindal Journal of Business Research

The history of mankind has witnessed various epidemics that have caused widespread destruction and suffering. In the last century, several influenza pandemics and pandemic threats occurred, including the notable outbreaks in 1918, 1957, and 1968. Other outbreaks, such as the swine flu, Russian flu, and avian flu, were contained through measures like quarantine and limits on travel. The severe acute respiratory syndrome (SARS) virus spread across Southeast Asia and Canada in 2002 but was not declared a pandemic. However, on March 11, 2020, the World Health Organization (WHO) officially declared the COVID-19 outbreak a global pandemic due to its rapid spread and devastating impact on lives and economies worldwide.

The COVID-19 outbreak has had a profound effect on the Indian stock market, leading to economic disruptions, job losses, and a decline in GDP growth. This article employs the econometric method EGARCH to analyze the impact of COVID-19 on the returns and volatility of the NIFTY 50 and other sectoral stock indices in India. The study also aims to assess the leverage effect of stock indices during the lockdown periods imposed as a response to the pandemic.

The literature review examines previous studies on the economic effects of infectious disease epidemics, with a focus on SARS and other outbreaks. Researchers have found that epidemics can have severe negative impacts on consumer demand, tourism, air travel-related services, and stock markets. The literature review highlights the need for studies specifically focusing on the Indian stock market and COVID-19.

The findings of this study will contribute to filling the existing gap in the literature regarding the impact of COVID-19 on the Indian stock market. By analyzing the returns, volatility, and leverage effect of stock indices during the pandemic, the study will provide valuable insights into how the stock market has reacted to this unprecedented crisis. The article concludes with the outline of the subsequent sections, which include a discussion of the related theoretical and empirical literature, data and methodology, empirical evidence, and a conclusion.

Overall, this study aims to provide a comprehensive analysis of the impact of COVID-19 on the Indian stock market, shedding light on the response of investors and the market's performance during the pandemic. The findings will be valuable for policymakers, investors, and market participants seeking to understand the implications of such global health crises on financial markets and develop strategies to mitigate future risks.