Abstract
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.
Highlights
The world is witnessing an unrecoverable loss due to the outbreak of the novel coronavirus, which has shuddered the entire world’s economic and social terrain
This paper aims to examine the impact of the COVID-19 outbreak on Indian firms listed on the National Stock Exchange (NSE) and analyze its impact on various sectors
The study shows that NSE-listed firms negatively responded to the COVID-19 outbreak, with more than 6% negative cumulative average abnormal returns (CAAR) in 10-day event windows
Summary
The world is witnessing an unrecoverable loss due to the outbreak of the novel coronavirus, which has shuddered the entire world’s economic and social terrain. The COVID-19 outbreak event is critical to examine stock price volatility. Viewing the investors’ movement, the impact of outbreaks on stock prices portrays the sentiments of the investors. Adopting an event study approach, considering the lockdown announcement as an event, the study intends to examine the impact of the COVID-19 outbreak on stock prices of various Indian industries. The stock prices of those industries that react to the pandemic of Novel Coronavirus (COVID-19) have been analyzed
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