An Event Study Analysis on Stock Market Reaction amid Geo-Political Crisis in India

Abstract

Geo-political conflicts have always impacted stock markets and valuation of companies either adversarly or inversaly, depending upon the magnitude and timing of such event. The present study focuses on the impact of Prime Minister Narendra Modi's speech on national security on 15th February 2019 on two major indices of Indian Capital Market i.e. BSE SENSEX 30 and CNX Nifty 50. The study included SENSEX 30 stocks and Nifty 50 stocks to examine the magnitude of PM Modi's brave and courageous speech on selected 76 sample stocks. The study found that PM's speech triggered the investors' sentiments in Indian capital market followed by a strong positive reaction by the two major capital market indices such as BSE SENSEX and CNX Nifty 50. The study showed the significant results during 31 days event study window. Further the study revealed that stocks continued to increase for consecutive 11 days and after Balakot air strike on militant camps both the share markets reflected negative trend in most of the stocks. The study concluded that if investors can link such speeches on national security with overall movements of share market, it would be beneficial for the investors and able to maximize the worth of their invested money in stocks