Author(s): Aman Bajaj, Natchimuthu N, Lavanya Mary
This paper deals with identifying the presence of monsoon effect in the Indian stock market using EGARCH model as well as the impact on the volatility of returns of the selected indices during the monsoon months in India. Daily time series data of closing price of four major indices i.e. Nifty 50, Nifty Smallcap 100, Nifty Midcap 100 and Nifty 500 over a period of sixteen years (April 2002 to March 2018) were collected and analysed. The results substantiate the fact that monsoon effect is present in the Indian equity market. The returns of Nifty 50 and Nifty 500 indices during the month of September were significantly higher. There was also a significant increase in the volatility during the month of September. No significant change was detected during the monsoon months for Midcap 100 and Nifty Smallcap 100. Monsoon effect was found in indices tracking top performing 50 stocks and 500 stocks listed in NSE. Hence, it can be inferred that monsoon effect is present in the Indian stock market.