The Outbreak of COVID-19 Pandemic and Its Impact on Stock Market Volatility: Evidence from a Worst-affected Economy

Abstract

The outbreak of COVID-19 has affected the entire global financial market in an unprecedented way. Due to the disruptions that emerged in the global market; the financial market of India also reacted to the pandemic and witnessed sharp volatility. Given the COVID-19 situation, this paper empirically investigates the impact of COVID-19 on the Indian stock market. Using daily closing prices of indices such as Nifty and Sensex, this study examines the volatility of these indices over the period 3rd September 2019 to 10th July 2020. Further, the study has attempted to make a comparative analysis of the return of the stock market in pre-COVID-19 and during the COVID-19 situation. GARCH model is used to capture the volatility of the indices. Findings reveal that the stock market in India has experienced volatility during the pandemic period. While comparing the results with that of the pre-COVID-19 period, we find that return on the indices is higher in the pre-COVID-19 period than during COVID-19. The return of both the stock market reached the bottom line during the first lockdown period, which is from24th March to 6th April.

Evaluation of selected capital market

“…In response to the pandemic, stock markets have fallen rapidly (Al-Qudah and Houcine, 2021 experienced volatility in the pandemic period. The study also shows that the returns of indexes were higher before the COVID-19 pandemic compared to the pandemic period (Bora and Basistha, 2021). The risks between two markets are transmitted faster if their parameters exceed the thresholds (Dias et al, 2020).…”

Financial markets' responses to COVID-19: A comparative analysis

“…Spillovers from the Indian stock market are evident in all sampled markets. India was arguably the worst affected economy by the covid-19 outbreak and its stock witnessed one of the worst volatilities during 2020 with, for example, the Sensex index dropping by 13.2% and the Nifty index falling by 29% on March 23, 2020 ( Bora and Basistha, 2021 ). The Indian stock market is, however, most significantly affected by USA stock returns (coefficient = 0.2954; standard error = 0.1009).…”

Stock Market Volatility: A Pre-Post Covid19 Analysis of Emerging Markets

“…Indian stock market is post-covid19 more volatile in comparison to the pre COVID19. Pre-post COVID19, the research observed that Parkinson volatility and Rogers-Satchell are less volatile, the close to close and Garman-Klass are the highest performer in the prepost covid19 scenario (Bora & Basistha, 2020).…”

“…GARCH model has used the judge the volatility of the Indian stock market. It witnessed that pre-Covid19 returns are higher than the post-covid19 returns and stated that BSE and NSE returns are reached the bottom line during the first lockdown time from March 24 to March 06, 2020 (Bora & Basistha, 2020).…”