Impact of COVID-19 on Stock Prices: An Empirical Analysis of the National Stock Exchange and Bombay Stock Exchange (2020-2024)

Abstract

The COVID-19 pandemic precipitated an unprecedented global economic shock, with financial markets experiencing extreme volatility. This study empirically investigates the impact of the pandemic on the Indian stock market, represented by the Nifty 50 index of the National Stock Exchange (NSE) and the Sensex of the Bombay Stock Exchange (BSE), from the initial outbreak in January 2020 through the post-pandemic recovery phase until June 2024. Utilizing daily closing price data, we employ an event study methodology to quantify abnormal returns around key pandemic-related events, including the WHO's declaration of a Public Health Emergency of International Concern (PHEIC) and the Indian government's lockdown announcement. Furthermore, we conduct a sectoral analysis to identify disparities in resilience and recovery across different industries. Our findings reveal a significant, sharp negative market reaction to the initial crisis, with cumulative abnormal returns (CAR) plunging to approximately -35% following the lockdown announcement. However, the analysis also uncovers a remarkable V-shaped recovery, driven by expansive fiscal and monetary policies, with markets not only recovering but reaching new highs by late 2020. Sectoral performance was highly asymmetric; while sectors like Banking, Realty, and Auto suffered profound losses, Pharmaceuticals, Information Technology, and Fast-Moving Consumer Goods (FMCG) demonstrated remarkable resilience and even growth. The study concludes that while the initial market shock was severe, the Indian equity markets exhibited significant resilience, albeit with recovery trajectories heavily influenced by sector-specific characteristics and government intervention.