Analyzing the Impact of Global Events on the Indian Stock Market Using Event Study Methodology
DOI:
https://doi.org/10.17010/ijrcm/2025/v12i1/175091Keywords:
abnormal returns
, COVID-19, cumulative abnormal returns, event study, global events, Indian stock market, Israel–Palestine War, Russia–Ukraine War.JEL Classification Codes
, G1, G2Paper Submission Date
, November 18, 2024, Paper sent back for Revision, December 15, Paper Acceptance Date, January 15, 2025Abstract
Purpose : This study aimed to examine the impact of global events such as COVID-19, the Russia–Ukraine war, and the Israel–Palestine war on the Indian stock market.
Methodology : The study employed a quantitative research approach, applying the market model event study methodology (ESM), where cumulative abnormal returns (CAR) were calculated for the event window. The data was collected from the National Stock Exchange website.
Findings : In the context of COVID-19, the study found that auto, financial services, and metals sectors were negatively affected, while the FMCG, IT, and pharma sectors were positively affected by the COVID-19 event. In the context of the Russia–Ukraine war and the Israel–Palestine war, the study concluded that the auto, financial services, FMCG, and IT sectors benefited, whereas the Russia–Ukraine war and the Israel–Palestine war negatively impacted the metals and pharma sectors. Finally, the findings suggested that the pharma sector was the only sector positively affected by all three events.
Practical Implications : This study provided insights into how investor sentiment shifted during global events, enabling market analysts to better predict market reactions to similar future events. Additionally, it helped investors identify sectors that were more sensitive to such global events, aiding in portfolio diversification and risk management.
Originality : This study highlighted sector-specific vulnerabilities and opportunities during periods of crisis, which was crucial for both investors and businesses. While much research focused on developed markets such as the United States or Europe, analyzing the response of the Indian stock market to global events offered valuable insights into an emerging market.
Downloads
Published
How to Cite
Issue
Section
References
Aggarwal, R., Inclan, C., & Leal, R. (1999). Volatility in emerging stock markets. The Journal of Financial and Quantitative Analysis, 34(1), 33–55. https://doi.org/10.2307/2676245
Aslam, F., & Kang, H.-G. (2015). How different terrorist attacks affect stock markets. Defence and Peace Economics, 26(6), 634–648. https://doi.org/10.1080/10242694.2013.832555
Bash, A., & Alsaifi, K. (2019). Fear from uncertainty: An event study of Khashoggi and stock market returns. Journal of Behavioral and Experimental Finance, 23, 54–58. https://doi.org/10.1016/j.jbef.2019.05.004
Bash, A., Alsaifi, K., & Al-Awadhi, A. M. (2021). Failed terror attack and stock market returns: The case of Pakistan Stock Exchange. Applied Economics Letters, 28(19), 1698–1702. https://doi.org/10.1080/13504851.2020.1851645
Boungou, W., & Yatié, A. (2022). The impact of the Ukraine–Russia war on world stock market returns. Economics Letters, 215, Article ID 110516. https://doi.org/10.1016/j.econlet.2022.110516
Buhagiar, R., Cortis, D., & Newall, P. W. (2018). Why do some soccer bettors lose more money than others? Journal of Behavioral and Experimental Finance, 18, 85–93. https://doi.org/10.1016/j.jbef.2018.01.010
Caldara, D., & Iacoviello, M. (2022). Measuring geopolitical risk. American Economic Review, 112(4), 1194–1225. https://doi.org/10.1257/aer.20191823
Charles, A., & Darné, O. (2014). Large shocks in the volatility of the Dow Jones industrial average index: 1928–2013. Journal of Banking & Finance, 43, 188–199. https://doi.org/10.1016/j.jbankfin.2014.03.024
Choudhry, T. (2010). World War II events and the Dow Jones industrial index. Journal of Banking & Finance, 34(5), 1022–1031. https://doi.org/10.1016/j.jbankfin.2009.11.004
Deepthy, K. (2023). Effect of Russia Ukraine War on the Indian stock market: An event study approach. Empirical Economics Letters, 22(Special Issue 3), 1–18. https://doi.org/10.5281/zenodo.8323311
Dey, K., & Brown, A. (2021). Indian stock market's response in five-phases to the COVID-19 pandemic. Indian Journal of Research in Capital Markets, 8(1–2), 26–45. https://doi.org/10.17010/ijrcm/2021/v8i1-2/160230
Essaddam, N., & Karagianis, J. M. (2014). Terrorism, country attributes, and the volatility of stock returns. Research in International Business and Finance, 31, 87–100. https://doi.org/10.1016/j.ribaf.2013.11.001
Gerlach, J. R., & Yook, Y. (2016). Political conflict and foreign portfolio investment: Evidence from North Korean attacks. Pacific-Basin Finance Journal, 39, 178–196. https://doi.org/10.1016/j.pacfin.2016.05.009
Guidolin, M., & La Ferrara, E. (2010). The economic effects of violent conflict: Evidence from asset market reactions. Journal of Peace Research, 47(6), 671–684. https://doi.org/10.1177/0022343310381853
Joseph, B., & Rajeshwari, U. R. (2023). Impact of gold price and oil price on the Indian stock market: With special reference to the Bombay Stock Exchange market. Indian Journal of Research in Capital Markets, 10(3–4), 74–83. https://doi.org/10.17010/ijrcm/2023/v10i3-4/173432
Kalra, R., Henderson Jr., G. V., & Raines, G. A. (1993). Effects of the Chernobyl nuclear accident on utility share prices. Quarterly Journal of Business and Economics, 32(2), 52–77. https://www.jstor.org/stable/40473084
Kannan, R. K., & Jesiah, S. (2024). Do major and emerging economies co-integrate with, influence over, or make a volatility spillover effect on the Indian stock market? An empirical analysis. Indian Journal of Research in Capital Markets, 11(2), 29–47. https://doi.org/10.17010/ijrcm/2024/v11i2/174177
Kaplanski, G., & Levy, H. (2010). Sentiment and stock prices: The case of aviation disasters. Journal of Financial Economics, 95(2), 174–201. https://doi.org/10.1016/j.jfineco.2009.10.002
Kim, B.-Y., & Roland, G. (2014). How credible is the North Korean threat? Economics of Transition and Institutional Change, 22(3), 433–459. https://doi.org/10.1111/ecot.12044
Kowalewski, O., & Åšpiewanowski, P. (2020). Stock market response to potash mine disasters. Journal of Commodity Markets, 20, Article ID 100124. https://doi.org/10.1016/j.jcomm.2020.100124
Kumar, S. P., & Sanjeev, M. A. (2020). Terrorism–tourism–economic growth nexus in India: An NARDL evidence. FIIB Business Review, 9(4), 300–308. https://doi.org/10.1177/2319714520965281
Lakshmanasamy, T. (2022). The causal relationship between volatility in crude oil price, exchange rate, and stock price in India: GARCH estimation of spillover effects. Indian Journal of Research in Capital Markets, 8(3), 8–21. https://doi.org/10.17010/ijrcm/2021/v8i3/167954
Leigh, A., Wolfers, J., & Zitzewitz, E. (2003). What do financial markets think of war in Iraq? (NBER Working Paper No. 9587). National Bureau of Economic Research. https://doi.org/10.3386/w9587
Nikkinen, J., Omran, M. M., Sahlström, P., & Äijö, J. (2008). Stock returns and volatility following the September 11 attacks: Evidence from 53 equity markets. International Review of Financial Analysis, 17(1), 27–46. https://doi.org/10.1016/j.irfa.2006.12.002
Omar, A. M., Wisniewski, T. P., & Nolte, S. (2017). Diversifying away the risk of war and cross-border political crisis. Energy Economics, 64, 494–510. https://doi.org/10.1016/j.eneco.2016.02.015
Pyo, D.-J. (2021). Does geopolitical risk matter? Evidence from South Korea. Defence and Peace Economics, 32(1), 87–106. https://doi.org/10.1080/10242694.2020.1829937
Ragin, M. A., & Halek, M. (2016). Market expectations following catastrophes: An examination of insurance broker returns. Journal of Risk and Insurance, 83(4), 849–876. https://doi.org/10.1111/jori.12069
Rigobon, R., & Sack, B. (2005). The effects of war risk on US financial markets. Journal of Banking & Finance, 29(7), 1769–1789. https://doi.org/10.1016/j.jbankfin.2004.06.040
Sahoo, S., & Kumar, S. (2023). Volatility spillover among the sectoral indices of the Indian capital market: Evidence from the COVID period. Indian Journal of Finance, 17(9), 41–57. https://doi.org/10.17010/ijf/2023/v17i9/173183
Saini, M., Yadav, M., Aggarwal, V., & Kumar, M. (2023). All weather friends: How did the Russia-Ukraine war impact Indian stock markets? International Journal of Diplomacy and Economy, 9(1), 93–111. https://doi.org/10.1504/IJDIPE.2023.128806
Salisu, A. A., Ogbonna, A. E., Lasisi, L., & Olaniran, A. (2022). Geopolitical risk and stock market volatility in emerging markets: A GARCH – MIDAS approach. The North American Journal of Economics and Finance, 62, Article ID 101755. https://doi.org/10.1016/j.najef.2022.101755
Shabarisha, N., & Madegowda, J. (2020). Impact of information asymmetry on return volatility–Domestic and cross-country evidence. Indian Journal of Research in Capital Markets, 7(2–3), 39–52. https://doi.org/10.17010/ijrcm/2020/v7i2-3/154512
Urquhart, A., & Hudson, R. (2016). Investor sentiment and local bias in extreme circumstances: The case of the Blitz. Research in International Business and Finance, 36, 340–350. https://doi.org/10.1016/j.ribaf.2015.09.010
Veeravel, V., Karthikeyan, K., & Remiya, P. R. (2021). Is the Indian stock market affected by COVID-19?: Evidence from cases or fatalities. Indian Journal of Research in Capital Markets, 8(3), 52–61. https://doi.org/10.17010/ijrcm/2021/v8/i3/162636
Wisniewski, T. P. (2016). Is there a link between politics and stock returns? A literature survey. International Review of Financial Analysis, 47, 15–23. https://doi.org/10.1016/j.irfa.2016.06.015
Wong, W.-Y., & Hooy, C.-W. (2021). Market response towards different types of politically connected firms during political events: Evidence from Malaysia. International Journal of Managerial Finance, 17(1), 49–71. https://doi.org/10.1108/IJMF-09-2019-0331
Yang, J. Y., Segara, R., & Feng, J. (2019). Stock price movements and trading behaviors around merger and acquisition announcements: Evidence from the Korean stock market. International Journal of Managerial Finance, 15(4), 593–610. https://doi.org/10.1108/IJMF-07-2018-0204
