Examining the association between stock return and seasonally adjusted trade in India

N Viswa Nadham,Roopashree Rao,Piyali Roy Chowdhury

doi:10.20525/ijrbs.v10i8.1487

Abstract

This paper aims to examine the association between Indian stock market return and seasonally adjusted trade for Indian Banking sector shares. The objective of the study is to measure the association between stock return and seasonally adjusted trade in the Indian stock market and recommend strategies. Due to the Covid 19 outbreak banking sector was highly affected, the Government of India also announced a moratorium on all categories of loans, banking business majorly depending on the deposit and loan creation, so the Government decision threaten the banking sector. Many private sector banks terminated temporary staff because of cut cost policies. We divided the banking sector into three segments. Namely, Public, Private and Small Finance Banks. Utilizing daily data from February 2020 to July 2020, consisting of 2196 in numbers, we ran a panel Vector Autoregression model to analyze the association. It was found that the return of stocks is influencing the volume of trade during this period. Also, while measuring the short-run causality, it is found that the return of banking stocks specifically granger causes the volume of trade. The suggestions of the study lie in providing importance to framing policies on improving the financial health of the economy through different fiscal policies. Strategic policies are required to face post-Covid situations. The turnaround strategies to combat the effects of the pandemic are characterized by the availability of the sustainable resources of the particular sector in consideration.

Highlights

Banks are the backbone of the economy that provide income and generate funds
Our economy had an experience of various pandemics in the previous years, it is an evident that it becomes exceedingly difficult to estimate societal, economical, psychological issues that have not been observed to a great extent in the past
Considering the current Indian investment situation, in this research we explore the association between volume of the trades in Indian stock market and return of the shares by applying Panel Vector Autoregression (VAR) model and Panel Grange causality in response to the COVID 19 outbreak

Summary

Introduction

Banks are the backbone of the economy that provide income and generate funds. The pandemic has created various societal and economic problems in India. The various banking, Insurance and other financial institutions represent and contribute to the majority to the growth of the economy The effect of this pandemic is cast all over the above sector which is well marked by the various unwanted movements of the stock market. Much has been studied on how to measure the relationship between stock volume and return, the banking sector has been forgotten as most of the research and studies are conducted based on banking shares in general conditions, but there is no any study conducted during pandemic time, there are knowledge gap that need to be filled, and this study examinates the association between stock and return and seasonally adjusted trade in India. H03: There is no granger causality running from seasonally adjusted trade to stock return

Literature Review

Methods

Conclusion