The impact of the COVID-19 outbreak on the Indian stock market – A sectoral analysis

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This paper aims to examine the impact of the COVID-19 outbreak on Indian firms listed on the NSE and analyze its impact on various sectors. In addition, a sub-sample analysis based on market capitalization was performed to understand the effect of size during extreme events. The sample consisted of 1,335 firms listed on the NSE India. A standard event study outlined by Brown and Warner (1985) was employed to analyze the price impact on the COVID-19 outbreak. The event windows from -10 days to +10 days were selected. The estimation window is 250 days. The Nifty 50 has been chosen as a proxy for market return. The sample firms witnessed a negative impact of the COVID-19 outbreak with a negative CAAR in different event windows. In addition, various sectors are classified according their responsiveness towards the COVID-19 outbreak into three groups: highly negatively affected, moderately negatively affected, and slightly negatively affected. The paper also points out that the pandemic substantially affects the above-median market capitalized firms than the below-median market capitalized firms, which contradicts the size effect phenomenon. The results assist shareholders in managing their portfolios and mitigate the systematic risk of their investments during extreme events such as a pandemic, wars, and others. This study is the first comprehensive analysis of the impact of the COVID-19 outbreak on different sectors in India. It is also the first study to investigate the size effect anomalies during extreme events.

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    • Figure 1. Day-wise AAR and CAAR for the NSE-listed firms to show the impact of the COVID-19 outbreak
    • Figure 2. Impact of COVID-19 on different sectors
    • Figure 3. Day wise CAAR for both above-median and below-median market capitalization firms on the COVID-19 outbreak in different event windows
    • Table 1. Recent research on the impact of COVID-19 on stock markets
    • Table 2. Day-wise AAR and CAAR for the NSE-listed firms to show the impact of the COVID-19 outbreak
    • Table 3. CAAR for the textile, media, financial services, healthcare services, and drug & pharma sectors to show the impact of the COVID-19 outbreak in different event windows
    • Table 4. CAAR for the plastic, banking, metal, agriculture, and automobile sectors to show the impact of the COVID-19 outbreak in different event windows
    • Table 5. CAAR for the electrical goods, chemical, tourism, transportation services, and computers sectors to show the impact of the COVID-19 outbreak in different event windows
    • Table 6. CAAR for the FMCG, paper, construction, and electricity sectors to show the impact of the COVID-19 outbreak in different event windows
    • Table 7. Day wise CAAR for both above-median and below-median market capitalization firms on the COVID-19 outbreak in different event windows
    • Conceptualization
      Rahul Kumar, Prince Bhatia, Deeksha Gupta
    • Data curation
      Rahul Kumar, Prince Bhatia, Deeksha Gupta
    • Formal Analysis
      Rahul Kumar, Prince Bhatia, Deeksha Gupta
    • Investigation
      Rahul Kumar, Prince Bhatia, Deeksha Gupta
    • Methodology
      Rahul Kumar, Deeksha Gupta
    • Project administration
      Rahul Kumar
    • Software
      Rahul Kumar, Prince Bhatia, Deeksha Gupta
    • Supervision
      Rahul Kumar
    • Validation
      Rahul Kumar, Prince Bhatia, Deeksha Gupta
    • Writing – original draft
      Rahul Kumar, Prince Bhatia, Deeksha Gupta
    • Writing – review & editing
      Rahul Kumar, Deeksha Gupta