Impact of Union Budget 2018 on Volatility of Indian Stock Market

Abstract

Volatility indicates the strength behind the price movement of financial assets. Greater the volatility, greater will be the variations in the price of various financial assets and risk thereon. Volatility in price movements of the financial assets will affect the economy and investors favorably and adversely as well. The study on volatility becomes more important due to the interdependence of the national stock market and stock with the rest of the world markets. In this article an attempt has been made to study the volatility that existed in the Indian stock market during the Union Budget 2018. The study attempts to analyze the impact of volatility on the risk and return of share price movements. To analyze the volatility during Union Budget 2018 price movements of various BSE Indices one month prior to the announcement of the budget and one month after the announcement of the budget were taken. The indices taken for the study are broad market index namely BSE SENSEX, Indices representing Large, medium and small capital companies namely BSE Large cap, BSE Midcap and BSE Small cap and indices of different sectors were taken for the study. The study results show that volatility has affected the return and risk of various indices adversely after the budget when compared to before the budget.