Demonetisation announcement and price movement of Indian sectoral indices

Abstract

The information about changes in economic policies in a country may influence its stock market. The demonetisation has its impact on various segments of the economy. Thus the study aims to analyse the price movement of Indian sectoral indices around the demonetisation announcements. The daily price returns were tested using GARCH (1, 1) Model and it found that low volatility was found in the post announcement period compared to the pre-announcement period. Thus the present study confirmed that Indian sectoral indices were influenced by the demonetization announcement. Therefore, investors should be aware of economic events while investing in the stock market.