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This study examines whether investing in R&D reduces the impact of exogenous shocks like the COVID‐19 on stock market performance and accounting performance of manufacturing firms in India. For the sample of listed manufacturing firms, the paper finds that the firms engaged in R&D activities had lower negative cumulative abnormal return than those firms that did not invest in R&D in the pre‐pandemic period using multiple event windows. The result suggests that R&D investments can lower value erosion for the shareholders during a severe crisis period. Further, using a difference‐in‐difference fixed effects model, the study finds that manufacturing firms engaged in R&D activities in the pre‐pandemic period exhibited higher return on sales and growth of total income during the pandemic quarter vis‐à‐vis the non‐R&D firms. The favorable accounting performance indicates the possibility of firm‐level R&D being associated with the firm's ability to adjust its functioning during a crisis, thereby reducing the effect of the crisis. Finally, the study documents that government intervention to reduce the spread of the virus had a differential impact on firms based on their industry of operation. The findings have implications for investors, corporate managers, and policymakers in India. [ABSTRACT FROM AUTHOR]

This paper empirically investigates the impact of COVID‐19 on the volatility of stock prices in India with the help of a generalized autoregressive conditional heteroscedasticity model. Daily closing prices of stock indices, Nifty and Sensex from September 3, 2019 to July 10, 2020 has been used for the analysis. Further, the study has been attempted to make a comparison of stock price return in pre‐COVID‐19 and during COVID‐19 situation. Findings reveal that the stock market in India has experienced volatility during the pandemic period. While comparing the result during COVID period with that of the pre‐COVID, we found that the return on the indices is higher in the pre‐COVID‐19 period than during COVID‐19. [ABSTRACT FROM AUTHOR]

We examine the dynamics of the impact of the evolving policy response during the COVID‐19 pandemic on the equity market sentiment in India. We operationalise our study by examining the India VIX, the fear gauge of the Indian equity market as an indicator for the market sentiment, and the country level Government Response Index of the Blavatnik School of Government, Oxford University as an indicator for the policy response. The relation is examined through the Markov‐switching model using high‐frequency daily data from January 30, 2020, to May 31, 2021. The evidence suggests that the policy response has a positive impact on the market sentiment when the market is fearful. Further, the evidence suggests that both the high‐fear state and the low‐fear state of the market sentiment given by the model are short‐lived indicating heightened volatility and possible speculation during the ongoing pandemic in the Indian equity market. [ABSTRACT FROM AUTHOR]

One strand of business cycle research focuses on the analysis of the comovement of business cycle variables at the aggregate and sectoral levels. Following this line of research, this article examines the volatility and inter‐industry comovement of output in the context of India for the post‐liberalisation period, that is, April 1992–December 2019. The study employs the dynamic conditional correlation‐multivariate generalised autoregressive conditional heteroscedasticity framework and thereby estimates the conditional variance and the time‐varying correlations. The results indicate that the volatilities of the capital goods sector and consumer durables sector relative to that of the aggregate industrial sector are higher, suggesting a higher amplitude of growth rates in these sectors. The conditional correlation estimates reveal that the use‐based sectors are positively correlated with the aggregate industry, and the capital goods sector has the highest correlation with the aggregate sector. Given that the capital goods sector is crucial for the development of the economy, it is essential to bring more stability and sustain growth in this sector. The results further point towards positive but relatively weak correlations between the pair of sectors. The finding of positive correlation underscores the comovement of different groups of industries. The relatively weak correlations between the pairs of use‐based sectors might be because of a lower degree of transmission of shocks from one use‐based sector to another. [ABSTRACT FROM AUTHOR]