Study on Impact of Covid-19 on Indian Stock Market
Name: Deep Parmar.
College: St. Rocks College of Commerce & Science.
Abstract
The global outbreak of COVID-19 has indeed had a severe impact on the financial markets
worldwide. The combination of these factors has created a complex and uncertain financial
environment that requires careful management and consideration from policymakers and market
participants alike. This research paper aims to analyze and understand the impact of the COVID-
19 pandemic on India's stock market. By studying the relationship between the pandemic and the
stock market, this research paper provides valuable insights into the Indian financial landscape.
There are two major stock exchanges in India i.e. Bombay Stock Exchange (BSE) and National
Stock Exchange (NSE). For the present research, the share prices of the top 20 companies listed
on the National Stock Exchange (NSE) in India. The study analyzes the changes in share prices
of these companies over a three-month period since the outbreak of the pandemic.
Keywords: Bombay Stock Exchange, National Stock Exchange, Stock market.
Introduction
Bombay Stock Exchange:
The impact of the COVID-19 pandemic on the Indian stock market, particularly the
Sensex and Nifty indices, has been substantial. On March 23, 2020, the Sensex index
experienced a significant decline of 13.2%, marking it as the sharpest single-day fall
since the Harshad Mehta Scam in April 1991. Similarly, the Nifty index also witnessed a
decline of nearly 29% during this period. The term "black swan event" has been used by
economists to describe the unforeseen and highly impactful nature of the COVID-19
pandemic on the Indian stock market. This event was unexpected and had severe
consequences, causing widespread disruption and uncertainty across various sectors. The
magnitude of the decline in both indices highlights the unprecedented nature of the
situation, posing significant challenges for businesses and investors during this period.
National Stock Exchange: After the outbreak of the COVID‐19, the stock market came
under fear as BSE Sensex and NSE Nifty fell by 38%. It leads to a 27.31% loss of the
total stock market from the beginning of this year. The COVID-19 pandemic has indeed
had a substantial impact on the global economy, affecting both advanced and emerging
economies. Countries such as the United States, Spain, Italy, Brazil, and India have
experienced significant economic challenges due to the pandemic. The financial market
has responded with dramatic movements and has been adversely affected. One major
consequence of the pandemic on the financial market is the significant volatility in both
the stock and bond markets. Investors have faced increased uncertainty and have had to
navigate through the economic turmoil caused by COVID-19. This volatility has led to
sharp fluctuations in stock prices and bond yields, as market participants reassess their
expectations and factor in the impact of the pandemic. Additionally, the pandemic has
caused significant disruptions in the energy markets. The price of oil has experienced a
large fall, driven by reduced global demand and uncertainties surrounding future
economic activity. On the other hand, the price of gold has seen a substantial increase as
investors seek safe-haven assets during times of uncertainty. These developments reflect
the complex interplay between various factors including global economic conditions,
investor sentiment, supply and demand dynamics, and government interventions. The
financial market continues to adapt to the ongoing challenges posed by the pandemic, and
investors are closely monitoring these market movements as they make their investment
decisions. Overall, the COVID-19 pandemic has had a profound impact on the financial
market, leading to significant volatility and shifts in asset prices. As the situation evolves,
it will be crucial for investors to stay informed and closely monitor these market trends in
order to make well-informed investment decisions.
Stock market:
a) Impact of Coronavirus on Pharma Stock: The pharmaceutical sector has
experienced significant growth in the stock market since March 23, 2020.
According to the major indices tracking pharmaceutical stocks, the S&P, BSE
Healthcare, and Nifty Pharma, there has been a remarkable increase. The S&P has
grown by approximately 36%, while the BSE Healthcare and Nifty Pharma have
both grown by around 42% during this period. This indicates that investors have
shown confidence in the pharmaceutical industry, potentially due to the industry's
role in combating the COVID-19 pandemic and developing potential treatments
and vaccines.
b) Impact of Coronavirus on Banks Stock: The COVID-19 pandemic has had a
significant impact on the banking sector and other related industries. The index
and finance index have experienced substantial declines, with both being down by
21% and 19% respectively from their January 31 levels. This indicates that
investors have been cautious about the stability and profitability of banks during
these uncertain times. In addition to the banking sector, other industries such as
metal, power, and telecom have also been affected. These sectors have seen
declines of between 10% and 15%. These declines can be attributed to factors
such as reduced demand, disrupted supply chains, and economic uncertainties
caused by the pandemic
c) Impact of Coronavirus on FMCG Stocks: The FMCG sector has shown resilience
amidst the broader market downturn caused by the COVID-19 pandemic. Despite
the overall market falling by approximately 13% this year, the Nifty FMCG index
has managed to maintain a positive growth of about 3%. This indicates that
investors have demonstrated confidence in the FMCG companies and their ability
to navigate through the challenges posed by the pandemic. The FMCG sector
comprises companies that produce essential consumer products such as food,
beverages, personal care items, and household goods. These products are
considered essential and in demand regardless of economic conditions. Therefore,
the FMCG sector has proven to be relatively insulated from the negative impact
of the pandemic compared to other industries.
Review of Literature
Gunaseelan and Kesavan, (2020) talks the current crisis on business and economics in India
during the Corona virus. The article highlights about the idea to recovery of losses occurred
during this pandemic situation. The data is collected from the secondary sources; here this article
suggests some ideas about revenue collection for the government to improve the national
income. The central and state government should work in an effective manner to overcome the
situation and people should also follow rules and policies of the government.
Nuhu Sasa and Ali Hasan (2020) The Impact of the COVID -19 on the Financial Markets:
Evidence from China and USA” The present study is undertaken to investigate the impact of the
COVID-19 on the Financial Markets from the period dated March 2020 to in China and USA. On
the other hand, some studies have pointed out that certain sectors and industries, such as
healthcare, e-commerce, and technology, have experienced growth and adaptation during the
pandemic. They suggest that while the overall impact on the economy may be negative, specific
sectors have shown resilience and even benefitted from changing consumer behaviour and
increased digitalization.
Ozili and Arun (2020) used major government policies such as public health measures,
restrictive measures, social distancing policies, and fiscal monetary policies to elucidate the
impact of COVID-19 on the global economy. According to them, higher fiscal policy and
restriction on movement had a negative impact on the level of economic activities.
Raj and Bahl, (2020) discussed about the impact of COVID on many sectors of the economy,
like the GDP growth levels, Unemployment rate, sector wise Increase or Decrease in sales etc.
The paper highlights on the pandemic situation in India, the data is collected from the secondary
sources through magazines, publications and also used a different analysis.
Harjoto et al. (2021) who used event analysis to show the strong negative impact of COVID-19
on the global markets, especially emerging markets and small firms. According to this study,
large firms and the US stock market recorded positive abnormal returns compared to the other
emerging market economies.
Objectives of the Research
a) To study the concept of - The study you mentioned highlights that the COVID-19
outbreak had a significant impact on the global stock market, leading to crashes and
sharp volatility. This volatility affected not only the global financial market but also had
an impact on the Indian stock market.
b) To understand - The outbreak of the COVID-19 pandemic had a significant impact on
global stock markets, including the Indian stock market. The Indian stock market
represented by indices such as BSE Sensex and NSE Nifty experienced a sharp decline
in value. As you mention both BSE Sensex and NSE Nifty fall by 38 % after the
outbreak of Covid 19.
c) To Identify and Analyse- It's important to understand that stock market volatility is a
natural characteristic of financial markets, and it can be influenced by a wide range of
factors, both internal and external.
Research Methodology
The collection of secondary data for this research was conducted using the NSE website.
The selected time period for data collection was from 13 January 2020 to 17 April 2020. This
particular timeframe was chosen in order to analyze the stock market both before and during the
COVID-19 period. By examining market trends before and during the pandemic, researchers can
gain insights into the potential impact of COVID-19 on the stock market.
Data collection methods
A. Primary Data: The study conducted an analysis on the impact of the COVID-19
outbreak on the Indian stock market in March 2020. The researchers gathered daily
security prices from Yahoo Finance and CMIE Prowess databases, taking into account
stock splits and dividends. The NIFTY50 index, which consists of 50 stocks from blue-
chip companies and represents a significant portion of the NSE's market capitalization,
was selected as a proxy for market returns. Figure 1 in the study illustrates the movement
of the NIFTY50 index during the onset of the pandemic. It reveals that the market
experienced a significant decline, approximately 15-17%, in March as the pandemic
reached India. However, there was some recovery in April as the market attempted to
rebound from the lows of March, showing an upward trend. This analysis highlights the
notable impact of the COVID-19 outbreak on the Indian stock market, with March
witnessing a substantial decline followed by a gradual recovery in April. The study
provides valuable insights into the market's response during this challenging period.
Figure 1. NIFTY50 price chart (source: NSE).
B. Secondary Data: The Nifty50 index, both pre and post-COVID, has experienced
notable fluctuations in its trends. Pre-COVID, the Nifty50 index showed a consistent
upward trend, with month-over-month increases. However, post-COVID, there have been
significant ups and downs in the index. In August 2020, there was a sudden drop in the
Nifty50 index, indicating a period of market uncertainty or a specific event that impacted
investor sentiment. This drop might have been influenced by various factors such as
economic conditions, global trends, or specific news affecting the Indian stock market.
On the other hand, the Nifty50 index reached new heights during the December 2020
period, reflecting a surge in market performance. This increase could stem from positive
economic indicators, investor optimism, or other favourable factors that contributed to a
bullish market sentiment. Overall, the Nifty50 index's post-COVID journey has been
characterized by significant fluctuations, including the sudden drop in August 2020 and
the impressive performance in December 2020. These trends highlight the dynamic
nature of the Indian stock market, influenced by a multitude of factors impacting investor
behaviour and market sentiment.
MONTH MARCH-DEC 2020 MARCH-DEC 2019
PERIOD INDEX VALUE TREND INDEXVALUE TREND
DEC 13,981.75 162.62 12,168.45 104.68
NOV 12,968.95 150.84 12,056.05 103.72
OCT 11,642.40 135.41 11,877.45 102.18
SEP 11,247.55 130.82 11,474.45 98.71
AUG 11,387.50 132.45 11,023.25 94.83
JULY 11,073.45 128.79 11,118.00 95.65
JUNE 10,302.10 119.82 11,788.85 101.42
MAY 9,568.95 111.30 11,922.80 102.57
APRIL 9,859.90 114.68 11,748.15 101.07
MARCH 8,597.75 100.00 11,623.90 100.00
Table 1: Trend of Nifty 50: pre and post Covid-
Findings & Suggestions
The findings suggest that the stock market in India has indeed experienced volatility during the
period of the COVID-19 pandemic. When comparing the returns on the indices between the pre-
COVID-19 period and the COVID-19 period, it is observed that the returns were higher in the
pre-COVID-19 period.
This indicates that the stock market performance was relatively stronger before the pandemic,
and that the pandemic had a negative impact on the stock market returns in India. Market
volatility during this time can be attributed to numerous factors such as market uncertainty,
changes in investor behaviour, and the overall economic impact of the pandemic. It's worth
noting that the stock market is influenced by various factors, and while the COVID-19 pandemic
has had a significant impact globally, it's important to consider other variables that may have
contributed to the observed volatility in the Indian stock market during this period.
The findings of the study indicate that the stock market, particularly the BSE Sensex, displayed
increased volatility during the period of the COVID-19 pandemic. This suggests that the
pandemic had a significant impact on the BSE Sensex, leading to greater fluctuations in stock
prices.
Conclusion
The analysis suggests that certain sectors in India are experiencing an increase in trading
volume while simultaneously witnessing a decline in average returns. This phenomenon can be
attributed to the perception among investors that the market will become bullish once the
pandemic subsides. As a result, they are actively trading within these sectors, driving up the
trading volume. The COVID-19 pandemic has indeed led to a financial crisis situation in many
countries, primarily due to partial shutdowns and reduced economic activities. The resulting
impact includes both companies and governments facing financial crunches, as their revenues
have significantly decreased or, in some cases, completely diminished.
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Website:
https://www.bseindia.com/
https://www.nseindia.com/
