A STUDY ON INTER-LINKAGE BETWEEN POLICY ANNOUNCEMENTS AND STOCK MARKET FLUCTUATION

Abstract

This project attempts to study the impact that various announcements and events related to the political and legal environments in India, have on the stock markets of the country. The study is carried out by identifying various major events spread across the two government rules and covering two General elections of India (2009 and 2014). The time period before and after the occurrence of these events is divided into various groups of three days each. Stock market return variances are then compared across these periods to check if any pre/post relationships exist between the occurrence of these events and equity market. We found that budgetary and political considerations have an impact on stock markets. Also, stock markets do show cases of predicting political and legal events before their occurrence. MACD analysis also helped us to understand probable causes for the observed volatility caused in markets by these events.