Volatility in Indian Stock Markets During COVID-19

Khushboo Gupta,Seshanwita Das,Kanishka Gupta

doi:10.4018/ijban.288512

Abstract

The aim of the paper is to evaluate the impact of novel COVID-19 on the returns and volatility of Indian stock markets with special reference to equity investment strategies of Bombay Stock Exchange. For the purpose of evaluating the impact, the study has applied GARCH) The research has considered a time frame from March, 2015 to January, 2021. Prior to implementing GARCH model, pre-estimation tests i.e., Augmented Dickey-Fuller and ARCH-Lagrange Multiplier, were conducted. Outcomes clearly indicate that the returns during the crisis for all the strategy indices have been negative which means that the COVID-19 outbreak resulted in massive losses. Additionally, 'during crisis' period showed increase in volatility for all the strategy indices depicting that the pandemic has a long-lasting effect and will take time to fade off. This research will help the investors in the investment decision process by giving them insights about the different strategies.

Highlights

COVID-19 has weakened the global economy and is considered to be a ‘Black Swan’ event for the world
Since the start of COVID-19 in late 2019, globally more than 88 million people have been affected by this virus and almost 2 million have succumbed to death
The present study evaluates various investment strategies to test which of them proved to be more stable in the highly unstable time of COVID-19

Summary

Introduction

COVID-19 has weakened the global economy and is considered to be a ‘Black Swan’ event for the world. Since the start of COVID-19 in late 2019, globally more than 88 million people have been affected by this virus and almost 2 million have succumbed to death. India is currently the 2nd most affected country as per the number of cases (as on 25th January 2021, as per WHO data available at: https://covid19.who.int/table). The global economy took a serious hit and shrank by 4.3 percent in the last year. The world economy faced such a severe recession in 2020 that only the recessions caused by the two World Wars and the Great Depression could be termed as more serious than this one.

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