![Open Access](https://i-scholar.in/lib/pkp/templates/images/icons/fulltextgreen.png)
![Restricted Access](https://i-scholar.in/lib/pkp/templates/images/icons/fulltextred.png)
Market Warnings : Learning from the Short-Term Impact of COVID-19 on Stock Market Constituents
Subscribe/Renew Journal
Purpose : The paper investigated the short-term impact of the lockdown announcement due to COVID-19 on various industries in India using firms’ stock returns and credit ratings.
Design/Methodology : The paper used event study methodology to analyze abnormal returns on stocks and credit rating changes of firms following the lockdown to understand the impact on the debt servicing of firms.
Findings : The paper found a heterogeneous impact of lockdown on various industries. Pharmaceuticals, chemicals, FMCGs, and telecom sectors saw positive abnormal returns, while textiles, financial services, construction, services, cement, and automobile sectors were the worst affected. The paper also found that smaller companies were more susceptible to the effects of such lockdowns. Indian subsidiaries of foreign MNCs and Central Government-owned firms fared better than privately-owned domestic firms. The debt servicing ability of firms was unimpacted due to the debt relief package announced to mitigate the impact of the lockdown.
Practical Implications : The paper's findings have implications for investors and managers who can make informed decisions in advance to reduce the risk to their investment if such a black swan event is expected. The paper's findings could help policymakers identify sectors that require immediate support due to the disruption from such an event.
Originality : The paper is unique in investigating the impact of the lockdown due to COVID-19 on companies across different industries, with different ownership groups and sizes. We have not come across such a detailed study investigating the impact of COVID-19 on various industries in India.
Keywords
COVID-19, Event Study, Industry Analysis, Lockdown, Stock Price, Risk.
JEL Classification Codes : G12, G14, G40, H12
Paper Submission Date : June 25, 2022 ; Paper sent back for Revision : December 26, 2022 ; Paper Acceptance Date : March 5, 2023 ; Paper Published Online : April 15, 2023
- Ali, M., Alam, N., & Rizvi, S. A. (2020). Coronavirus (COVID-19) — An epidemic or pandemic for financial markets. Journal of Behavioral and Experimental Finance, 27, 100341. https://doi.org/10.1016/j.jbef.2020.100341
- Anderson, R. M., Heesterbeek, H., Klinkenberg, D., & Hollingsworth, T. D. (2020). How will country-based mitigation measures influence the course of the COVID-19 epidemic? The Lancet, 395(10228), 931–934. https://doi.org/10.1016/S0140-6736(20)30567-5
- Bhattacharya, A. (2019). Impact of negative news on the U.S. soft drinks industry. Indian Journal of Finance, 13(8), 26–37. https://doi.org/10.17010/ijf/2019/v13i8/146302
- Chen, C.-D., Chen, C.-C., Tang, W-W., & Huang, B.-Y. (2009). The positive and negative impacts of the Sars outbreak: A case of the Taiwan industries. The Journal of Developing Areas, 43(1), 281–293. https://doi.org/10.1353/jda.0.0041
- Fama, E. F., Fisher, L., Jensen, M. C., & Roll, R. (1969). The adjustment of stock prices to new information. International Economic Review, 10(1), 1–21. https://doi.org/10.2307/2525569
- Garrett, T. A. (2007). Economic effects of the 1918 influenza pandemic : Implications for a modern-day pandemic. Federal Reserve Bank of St. Louis. https://www.stlouisfed.org/~/media/files/pdfs/community-development/research-reports/pandemic_flu_report.pdf
- Gössling, S., Scott, D., & Hall, C. M. (2021). Pandemics, tourism and global change: A rapid assessment of COVID-19. Journal of Sustainable Tourism, 29(1), 1–20. https://doi.org/10.1080/09669582.2020.1758708
- Gupta, P., & Kohli, B. (2021). Herding behavior in the Indian stock market: An empirical study. Indian Journal of Finance, 15(5–7), 86–99. https://doi.org/10.17010/ijf/2021/v15i5-7/164495
- Harjoto, M. A., Rossi, F., & Paglia, J. K. (2021). COVID-19: Stock market reactions to the shock and the stimulus. Applied Economics Letters, 28(10), 795–801. https://doi.org/10.1080/13504851.2020.1781767
- He, P., Sun, Y., Zhang, Y., & Li, T. (2020). COVID–19’s impact on stock prices across different sectors — An event study based on the Chinese Stock Market. Emerging Markets Finance and Trade, 56(10), 2198–2212. https://doi.org/10.1080/1540496X.2020.1785865
- He, Q., Liu, J., Wang, S., & Yu, J. (2020). The impact of COVID-19 on stock markets. Economic and Political Studies, 8(3), 275–288. https://doi.org/10.1080/20954816.2020.1757570
- International Monetary Fund. (2021). World economy outlook. https://www.imf.org/en/Publications/WEO/Issues/2021/03/23/world-economic-outlook-april-2021
- Jaiswall, S. S., & Bhattacharyya, A. K. (2016). Corporate governance and CEO compensation in Indian firms. Journal of Contemporary Accounting & Economics, 12(2), 159–175. https://doi.org/10.1016/j.jcae.2016.06.001
- Jaiswall, S. S., & Raman, K. K. (2021). Sales growth, CEO pay, and corporate governance in India. Journal of Accounting, Auditing & Finance, 36(2), 249–277. https://doi.org/10.1177/0148558X19825672
- Jawed, M. S., Dhaigude, A. S., & Tapar, A. V. (2019). The sectoral effect of demonetization on the economy: Evidence from early reaction of the Indian stock markets. Cogent Economics & Finance, 7(1), 1595992. https://doi.org/10.1080/23322039.2019.1595992
- Keogh-Brown, M. R., & Smith, R. D. (2008). The economic impact of SARS: How does the reality match the predictions? Health Policy, 88(1), 110–120. https://doi.org/10.1016/j.healthpol.2008.03.003
- Kolari, J. W., & Pynnönen, S. (2010). Event study testing with cross-sectional correlation of abnormal returns. The Review of Financial Studies, 23(11), 3996–4025. https://doi.org/10.1093/rfs/hhq072
- Kolari, J. W., & Pynnonen, S. (2011). Nonparametric rank tests for event studies. Journal of Empirical Finance, 18(5), 953–971. https://doi.org/10.1016/j.jempfin.2011.08.003
- Lee, J.-W., & McKibbin, W. J. (2004). Estimating the global economic costs of SARS. In S. Knobler, A. Mahmoud, S. Lemon, A. Mack, L. Sivitz, & K. Oberholtzer (eds.), Learning from SARS: Preparing for the next disease outbreak. National Academies Press (US). https://www.ncbi.nlm.nih.gov/books/NBK92473/
- Liu, H., Manzoor, A., Wang, C., Zhang, L., & Manzoor, Z. (2020). The COVID-19 outbreak and affected countries stock markets response. International Journal of Environmental Research and Public Health, 17(8), 2800. https://doi.org/10.3390/ijerph17082800
- McKibbin, W. J., & Fernando, R. (2020). The global macroeconomic impacts of COVID-19: Seven scenarios. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3547729
- McKibbin, W. J., & Sidorenko, A. A. (2006). Global macroeconomic consequences of pandemic influenza. Centre for Applied Macroeconomic Analysis. https://cama.crawford.anu.edu.au/pdf/working-papers/2006/262006.pdf
- Mishra, A. R. (2022). At 6.6%, India’s GDP contracted less than projected in FY21: NSO data. Business Standard. https://www.business-standard.com/article/economy-policy/at-6-6-india-s-gdp-contracted-less-than-projected-in-fy21-nso-data-122020100024_1.html
- Nadig, A. (2017). Impact of interim dividend announcements on banking stock prices in India. Indian Journal of Finance, 11(7), 50–64. https://doi.org/10.17010/ijf/2017/v11i7/116567
- National Stock Exchange of India Ltd. (2020). NSE indexogram. https://www1.nseindia.com/content/indices/ind_nifty_500.pdf
- Nippani, S., & Washer, K. M. (2004). SARS: A non-event for affected countries’ stock markets? Applied Financial Economics, 14(15), 1105–1110. https://doi.org/10.1080/0960310042000310579
- No interest on interest lockdown loan moratorium , rules SC; refuses to extend relief. (2021, March 23). Financial Express. https://www.financialexpress.com/industry/banking-finance/no-interest-on-interest-lockdown-loan-moratorium-rules-sc-refuses-to-extend-relief/2218344/#:~:text
- Pandya, I. H. (2014). Impact of the union budget on the Indian stock market. Indian Journal of Finance, 8(3), 44–57. https://doi.org/10.17010/ijf/2014/v8i3/71963
- Peterson, P. P. (1989). Event studies: A review of issues and methodology. Quarterly Journal of Business and Economics, 28(3), 36–66. https://www.jstor.org/stable/40472954
- Pradhan, S. K., & Kasilingam, R. (2018). Stock split announcements and their impact on shareholders’ wealth : A study on the Indian stock market. Indian Journal of Finance, 12(10), 46–61. https://doi.org/10.17010/ijf/2018/v12i10/132499
- Reserve Bank of India. (2020). COVID-19 – Regulatory package. https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11835&Mode=0
- Sharma, C. (2022). Impact of India’s 2019 corporate tax cut announcement on the stock market. Indian Journal of Finance, 16(2), 24–36. https://doi.org/10.17010/ijf/2022/v16i2/162839
- Shu, H.-C. (2010). Investor mood and financial markets. Journal of Economic Behavior & Organization, 76(2), 267–282. https://doi.org/10.1016/j.jebo.2010.06.004
- Smith, R. D. (2006). Responding to global infectious disease outbreaks : Lessons from SARS on the role of risk perception, communication and management. Social Science & Medicine, 63(12), 3113–3123. https://doi.org/10.1016/j.socscimed.2006.08.004
- Strong, N. (1992). Modelling abnormal returns: A review article. Journal of Business Finance & Accounting, 19(4), 533–553. https://doi.org/10.1111/j.1468-5957.1992.tb00643.x
- Syed, A. A., Tripathi, R., & Deewan, J. (2021). Investigating the impact of the first and second waves of the COVID - 19 pandemic on the Indian stock and commodity markets : An ARDL analysis of gold, oil, and stock market prices. Indian Journal of Finance, 15(12), 8–21. https://doi.org/10.17010/ijf/2021/v15i12/167306
- Zouaoui, M., Nouyrigat, G., & Beer, F. (2011). How does investor sentiment affect stock market crises? Evidence from panel data. The Financial Review, 46(4), 723–747. https://doi.org/10.1111/j.1540-6288.2011.00318.x
![](https://i-scholar.in/public/site/images/abstractview.png)
Abstract Views: 125
![](https://i-scholar.in/public/site/images/pdfview.png)
PDF Views: 0