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 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.