Analysis of Impact of GST Announcements on Indian Stock Market

Abstract

The Goods and Services Tax (GST) implemented in India in July 2017 has had a significant impact on various sectors of the economy, including the stock market. The research problems regarding the impact of GST on the Indian stock market would include the following key aspects: Volatility in Stock Prices: How has GST affected the volatility of stock prices in the Indian stock market and Sector-wise Impact: Which sectors, such as FMCG, IT, or Banking, have been most affected by GST, and how have their stock prices responded. The present study analysed the impact of GST announcement on share prices was examined over the 21-day window period, i.e., 10 days before and 10 days after the GST Council Meeting is considered. The Mean Adjusted Model, Market Model and Market Adjusted Model were used for estimating the expected returns, Average Abnormal Returns (AAR) and Cumulative Average Abnormal Returns (CAAR) and T-Test for sample companies. The study results imply that investors in different sectors have different expectations of the GST while investing in the stock market. The automobile industry in India didn’t give significant returns in the event window. This may be because the GST rollout positively affected consumer attitudes, as they expected a fall in prices.