Existence of Herding Behaviour in the Indian Stock Market: An Empirical Analysis During the COVID-19 Period

Abstract

The current study focuses on herding behaviour that occurred in the “Indian Stock Market (ISM)” between 2011 and during the time of the Covid-19 pandemic. The study examines the closing price of the NSE benchmark Nifty and 33 companies from three sectoral indices selected out of fifteen available on a daily basis. The sectors are the Auto sector, Nifty Bank, and IT sector, from 1 January 2011 to 31 December 2020. Christie and Huang (1995) suggested the CSSD and Chang, et al. (2000) suggested the CSAD models to study the existence of herding behavior during the Covid-19 period. Findings based on the daily closing price reveal that for the ten-year data, no significant herding is present in the market, whereas Covid-19 had caused herding during the rising (up) and falling (down) market. The calculated herding period during the Covid-19 timeframe is from 11 March 2020 to 31 December 2020. The study found no herding between 1st January 2011 to 31 December 2019 in the ISM. The herding was evident during the Covid-19 time frame, possibly due to emotional biases, fear, and uncertainty of the pandemic. The study will be helpful to investors, decision-makers, and market regulators in decisionmaking in the capital market. It will also facilitate brokers and market participants to prepare different trading strategies to be successful in regular times and times of adversity.