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The IUP Journal of Applied Finance

Covid-19 Lockdown and Its Effect on BSE Indexes: An Event Study

Article Details

Pub. Date	: April, 2022
Product Name	: The IUP Journal of Applied Finance
Product Type	: Article
Product Code	: IJAF020422
Author Name	: Shraddha Kokane
Availability	: YES
Subject/Domain	: Finance
Download Format	: PDF Format
No. of Pages	: 10

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Abstract

This paper scrutinizes the Indian stock market performance after the central government's announcement of lockdown on March 22, 2020 due to the Covid-19 pandemic. The lockdown had different impacts on varied sectors which were considered for the study, namely, banking, oil and gas, healthcare, capital goods, Fast Moving Consumer Durables (FMCD), and small-cap and mid-cap segments. The data was collected from BSE indexes, and an event study with estimation window from May 14, 2019 to March 5, 2020, a period of 201 market working days, was considered. The findings reveal that small-cap, mid-cap, FMCD and healthcare sectors were most impacted by the nationwide lockdown and thus had abnormal returns, while the impact on other sectors like banking, oil and gas, and capital goods was not significant.This paper scrutinizes the Indian stock market performance after the central government's announcement of lockdown on March 22,2020 due to the Covid-19 pandemic. The lockdown had different impacts on varied sectors which were considered for the study, namely, banking, oil and gas, healthcare, capital goods, Fast Moving Consumer Durables (FMCD), and small-cap and mid-cap segments. The data was collected from BSE indexes, and an event study with estimation window from May 14, 2019 to March 5, 2020, a period of 201 market working days, was considered. The findings reveal that small-cap, mid-cap, FMCD and healthcare sectors were most impacted by the nationwide lockdown and thus had abnormal returns, while the impact on other sectors like banking, oil and gas, and capital goods was not significant.

Introduction

Lockdowns are normally announced by a country when there is a hazard or a potential threat to the public at large. Many countries started imposing a lockdown around March 2020 following the spread of Covid-19 across the world. Countries like Albania, Austria, Belgium, Bulgaria, Croatia, Ecuador, El Salvador, France, Iran, Ireland, Kuwait, Lebanon, Mongolia, Peru, Qatar, Saudi Arabia, Spain, Sri Lanka, Ukraine, Venezuela and India declared lockdowns roughly around this time.

A lockdown entails stoppage of all economic activities. As financial markets are interconnected, the impact of the lockdown on the stock market was evident. When the Indian stock markets opened on Monday, March 23, 2020, the news of the lockdown had reached the investors, and how the same impacted the stock market indexes-like bankex, oil and gas, small-cap, FMCD, healthcare, mid-cap, and capital goods-is what this study focuses on.