Perils of War-An Investigation into the Short-Term Impact of the Russia-Ukraine Conflict on Indian Stock Market

Abstract

Purpose: The paper focuses on understanding the short-term reaction of the Indian stock market and its constituents to the Ukraine conflict. For this purpose, the paper investigates the initial reaction of the Indian stock market to the start of the Russia Ukraine conflict in February 2022.

Design/Methodology/Approach: The paper uses 23 indices listed on the National Stock Exchange of India to analyze the impact of the event on the Indian Stock Market. The paper deploys an event study methodology to analyze abnormal stock returns immediately after the start of the conflict.

Findings: The paper found a heterogeneous impact of the war on various sectors. The result shows that sectors such as Auto, Banking, and Financial Services saw negative abnormal returns in the stock market due to the war. In contrast, sectors such as Oil & Gas, Energy, and Metal witnessed significant positive returns following the start of the war. The paper finds that the impact on large, mid, and small-size firms was not significantly different. The findings of the paper are significant for investors for providing insight into managing risk when faced with such a conflict.

Originality/Value: The paper is unique, with no other research investigating the impact on such detailed constituents of the Indian stock market due to the Russia Ukraine conflict.

Paper Type: Case Based Study.