COVID-19 Impact on Nifty Banks: An Event Study Methodology

Abstract

The financial sector, because of its catalytic role in the economy, has always been in the eye of the storm in economic difficulties. Due to the pandemic, the stock market had lost about 27 percent by April 2020 and bank nifty has had a lion’s share in pushing the index down to this level. Uncertainty arose as the containment of the disease and the availability of vaccines remain uncertain; this contributed to the plunge in investor confidence. Because of the central role of banks in the development initiatives of the governments, COVID-19 has become a significant threat to the sustainability of the banks globally, especially in developing economies. However, we believe every downfall brings in new opportunities for the investors. Therefore, the present study attempted to study both the gloom and boon and observed that there were short-term abnormal returns to the investors of nifty banks in two different periods - the detection of the first case of COVID-19 in India and the lockdown periods in India. The impacts of both the events are calculated by applying Market and Risk Adjusted model, Market Adjusted Return model and Mean Adjusted Return model. The paper concludes that the impacts were insignificant during the first period and was quite significant in the subsequent period. Nifty banks have earned negative abnormal returns during the pre-lockdown period and positive abnormal returns during post lockdown period which indicates that the markets reacted positively as India implemented the first lockdown.

What determines the performance of pharmaceutical firms in India on account of COVID-19 interventions?

“…In India, major COVID-19 studies focused on market reactions to governmental actions such as lockdowns (Alam et al , 2020; Basumatary and Jain, 2020), vaccination (Behera et al , 2022; Gupta and Gupta, 2023; Mirza et al , 2023; Yunus Kasim et al , 2022; Maneenop and Kotcharin, 2023) and COVID-19 cases (Kumar Digal et al , 2020), whereas a few investigated the impact of business announcements (Pandey et al , 2022).…”