View of A STUDY OF THE IMPACT OF PHARMA INDEX ON INDIAN STOCK MARKET DURING COVID-19

ACCENT JOURNAL OF ECONOMICS ECOLOGY & ENGINEERING Peer Reviewed and Refereed Journal, ISSN NO. 2456-1037

Available Online: www.ajeee.co.in/index.php/AJEEE

Vol. 07, Special Issue 06, (MIM/IC-RI-2022) October 2022 IMPACT FACTOR: 7.98 (INTERNATIONAL JOURNAL) 30 A STUDY OF THE IMPACT OF PHARMA INDEX ON INDIAN STOCK MARKET DURING

COVID-19 Kavita Vijay

Asst. Professor, Prestige Institute of Management, Dewas Dr. Rubina Pathan

Asst. Professor, Mahakal Institute of Management, Ujjain

Abstract - Stock markets are good indicators of the economic events that would unfold in the next six months to a year's time.The Indian economy has been experiencing significant slowdown over the past few quarters. There was a strong hope of recovery but, the new corona virus epidemic has made the recovery extremely difficult. The COVID-19 outbreak has presented new and significant downside risks to the global economic outlook. Globally, stock markets are in a bear grip on concerns over the COVID-19, pandemic. The Indian financial markets are closely interlinked with the global markets. India has often been labeled as the pharmacy of the developing world. The covid-19 pandemic has taken a toll on various sectors, but the pharmaceutical industry is the only one to buck the trend and in fact deliver stellar performance so far in 2020. Investors have realized the potential of pharmaceutical stocks amidst the ongoing crisis. Indian pharma companies have always had a good standing in the global pharmaceutical industry. During this pandemic, pharmaceutical sector has showed a glimmer of hope. The COVID-19 outbreak has significantly increased the demand for generic and branded generic drugs. The purpose of this study is to examine the impact of S & P BSE Healthcare and Nifty Pharma on Sensex and Nifty respectively. The appropriate regression test would be applied to test the data.

The major finding of the study indicated no significant relationship between pharmaceutical index and Indian stock market during Covid 19.

Keywords: Pharmaceutical indices, Stock market, SENSEX, Nifty, Covid-19.

1 INTRODUCTION

The stock market index acts like a barometer which shows the overall conditions of the market. They facilitate the investors in identifying the general pattern of the market. In present scenario Market has been under tremendous stress due to the COVID-19 pandemic. COVID-19 is regarded as a public health emergency of international concern.

The corona virus outbreak has not only caused severe damage to the health of the people, but also to their welfare. The COVID-19 pandemic has created an uncertainty worse than a war in many aspects. Owing to this crisis, the Indian stock markets witnessed one of the greatest crashes ever since their inception. Almost all the sectors and industries were seen trading in red. Corona virus outbreak has struck industries such as Travel, Tourism, Entertainment, Hotels and Airline business. Despite such an unusual drop in the share prices across the board, the pharmaceutical industry has been showing a glimmer of hope.

Investors have now come to realize the potential of pharmaceutical stocks amidst the ongoing crisis. In India, the NSE Nifty the BSE Sensex acts as the benchmark indices. They are believed to indicate the performance of the entire stock market. Likewise, an index which is made up of pharma stocks is assumed to portray the average price of stocks of companies operating in the pharmaceutical industry. The Indian pharma industry has been a world leader in generics both globally and in domestic markets contributing significantly to the global demand for generics in terms of volume. The COVID- 19 outbreak has significantly increased the demand for generic and branded generic drugs.

This is another major reason for pharma stocks’ rise during market volatility. The purpose of this study is to examine the impact of pharmaceuticals indices on Indian stock market during Covid 19.

2 LITERATURE REVIEW

Various pandemics in history such as Black Death Plague, Influenza, Ebola, SARS and the pandemic related crises have caused enormous negative impacts on health and economies.

Many of the studies have been conducted to examine the impact of pharma and other different sectors on Indian stock market during the pandemics. Also studies related to the

ACCENT JOURNAL OF ECONOMICS ECOLOGY & ENGINEERING Peer Reviewed and Refereed Journal, ISSN NO. 2456-1037

Available Online: www.ajeee.co.in/index.php/AJEEE

Vol. 07, Special Issue 06, (MIM/IC-RI-2022) October 2022 IMPACT FACTOR: 7.98 (INTERNATIONAL JOURNAL) 31 economic effects of the infectious virus epidemic could be referred to as we discuss the impact of COVID-19.

Liu et al. (2020) concluded that COVID-19 outbreak has a significant negative effect on stock market returns across all affected countries and areas and confirmed cases of COVID-19 have significant adverse effects on major stock indices performances in terms of abnormal returns. Investor’s fear sentiment is proved to be a complete mediator and transmission channel for the COVID-19 outbreak’s effect on stock markets.

Manojkrishnan and Aravind (2020), found that the pharmaceutical stocks maintained a general momentum with the benchmarking index Nifty. Covid 19 is an epidemic for which proper vaccine/medicine were not yet invented. As a result, the outbreak of Covid 19 is not going to increase the general supply of vaccines or medicines.

The study also revealed that companies with a strong brand reputation are sustaining in the crisis period despite the general falling market trend.

Thomas et al. (2020) found from the results of one-way analysis of variance among different sectors in terms of mean share return during the announcement of lock down by India that the null hypothesis has accepted at 5% level of significance. Hence, there existed no significant difference among different sectors in terms of mean share return during the announcement of lockdown in India. Results of the study show that the impact of Covid-19 Announcements on NIFTY Stocks varied among various sectors.

According to Lynch et al. (2019), Pharmaceuticals contribute a significant percentage to stock markets total volatility.

Gopalakrishnan & Vijay (2017) examined the volatility of selected shares in pharmaceutical industry listed in NSE for the purpose of providing valuable knowledge to the investors to succeed which helps the potential investors to make informed and rational investment decision.

Macciocchi et al. (2016) studied the short-term economic impact of the Zika virus outbreak on Brazil, Argentina and Mexico, and their results showed that, with the exception of Brazil, the market indices of these three Latin American and Caribbean Countries (LCR) did not show large negative returns the day after each shock.

Ramanathan and Gopalakrishnan (2013) examined the volatility in Indian stock market during the post and pre recession period. The study concluded that the share prices are always fluctuating due to various factors. The volatility is the biggest problem for trading in the stock market. Understanding the historical volatility is important for one who invests in the stock market. The study has made an attempt to examine volatility of sectoral indices listed in NSE.

Wang, Yang, and Chen (2013) suggested that infectious disease outbreaks have a major impact on the performance of biotechnology stock in Taiwan.

2.1 Objectives of the Study

 To examine the effect of S & P BSE Healthcare on the Sensex.

 To examine the effect of Nifty pharma on the performance of NIFTY.

Rationale: The Indian pharma industry has been a world leader in generics both globally and in domestic markets contributing significantly to the global demand for generics in terms of volume. At a time when most sectors on the stock markets have taken a beating, due to the COVID-19 pandemic, the pharmaceutical industry has outperformed, with some Indian pharma stocks that have higher contribution to the domestic market. Several drugs manufactured in India have reached the shores of various developed economies such as the UK, the EU, and the US. Furthermore, the USFDA has awarded quick approvals for asthma drugs manufactured by Indian pharmaceutical companies, leading to a positive impact in Indian pharma stock prices. The study analyzes the impact of pharmaceuticals indices on Sensex and Nifty.

2.2 Hypotheses

H01 = There is no significant effect of Pharma index listed in NSE on Nifty.

H11 = There is significant effect of Pharma index listed in NSE on Nifty.

H02 = There is no significant effect of Pharma index listed in BSE on Sensex.

ACCENT JOURNAL OF ECONOMICS ECOLOGY & ENGINEERING Peer Reviewed and Refereed Journal, ISSN NO. 2456-1037

Available Online: www.ajeee.co.in/index.php/AJEEE

Vol. 07, Special Issue 06, (MIM/IC-RI-2022) October 2022 IMPACT FACTOR: 7.98 (INTERNATIONAL JOURNAL) 32 H12= There is significant effect of Pharma index listed in BSE on Sensex.

3 RESEARCH METHODOLOGY

Data: The data ranges from a period of Jan 2020 to June 2020 during covid 19. The daily data has been taken and regression is run on the same.

Model: The Regression model is as follows:

Y= β1 + β2 X+εi

Where

Y=closing price of NIFTY 50

X= closing price of NIFTY PHARMA εi= error term

Y= β1 + β2 X+εi

Where

Y=closing price of SENSEX

X= closing price of S & P HEALTH CARE εi= error term

4 RESULTS & DISCUSSION

H01: There is no significant effect of Pharma index listed in NSE on Nifty

Model R R Square

Adjusted R Square

Std. Error of the Estimate

1 .096^a .009 .001 1399.19557

Table 2: Coefficients^a Model

Unstandardized Coefficients Standardized Coefficients

T Sig.

B Std. Error Beta

1 (Constant) 11530.478 1087.909 10.599 .000

nifty pharma -.133 .125 -.096 -1.061 .291

The regression result indicates that the relationship between the NIFTY PHARMA and NIFTY 50 is not significant during Covid 19 for the period of Jan 2020 to June 2020. The Null hypothesis is accepted. Thus it can be concluded that pharmaceutical indices didn’t affected the NIFTY during the pandemic.

Results and Discussion:

H02 = There is no significant effect of Pharma index listed in BSE on Sensex Table 1:

Model R R Square Adjusted R

Square Std. Error of the Estimate 1 .011^a .000 -.008 4734.97953

Table 2: Coefficients^a Model

Unstandardized

Coefficients Standardized Coefficients

T Sig.

B Std. Error Beta

1 (Constant) 34783.782 4607.728 7.549 .000

S & P healthcare .039 .319 .011 .123 .902

The regression result indicates that the relationship between the S&P HEALTHCARE and SENSEX is not significant during covid 19 for the period of Jan 2020 to June 2020. The Null hypothesis is accepted. Thus it can be concluded that pharmaceutical indices didn’t affected the SENSEX during the pandemic.

The result indicates that the pharma index didn’t affect the Indian stock market as whole. Although, both the major indices of pharmaceutical stocks – S&P BSE Healthcare and Nifty Pharma have witnessed the rise in their share prices but still no deeper impact on Indian stock market was seen during the study period.

ACCENT JOURNAL OF ECONOMICS ECOLOGY & ENGINEERING Peer Reviewed and Refereed Journal, ISSN NO. 2456-1037

Available Online: www.ajeee.co.in/index.php/AJEEE

Vol. 07, Special Issue 06, (MIM/IC-RI-2022) October 2022 IMPACT FACTOR: 7.98 (INTERNATIONAL JOURNAL) 33 5 CONCLUSION

The study indicates that Pharma index were not affecting the Indian stock market during covid 19. The data used in this study were collected from the period of Jan 2020 to June 2020. Regression results shows that Pharmaceuticals index has no impact on Indian stock market during the study period. Covid 19 has disrupted the Indian stock market but pharmaceutical sector has witnessed a sharp rise during the market volatility.

REFERENCES

1. Dr. M. Muthu Gopalakrishnan & Amal Vijay A K(2017), “A Study on Risk Return Analysis of Pharmaceutical Industries in Indian Stock Market”, Imperial Journal of Interdisciplinary Research (IJIR) Vol-3, Issue-5, 2017 ISSN: 2454-1362.

2. Dr. M. Muthu Gopalakrisnan and Dr. K. V. Ramanathan (2013), “Volatility in Indian Stock Market – A Study of Post and Pre-Recession Period”, Namex International Journal of Management Research 138 Vol. 3, Issue 1, Jan – June 2013. ISSN 2250 -2076.

3. Dr. T. C. Thomas, Dr. G. Sankararaman, Dr. S. Suresh (2020),” Impact of Covid-19 Announcements on Nifty Stocks”, Journal of Critical Reviews Vol. 7, Issue 13, 2020 ISSN- 2394-5125.

4. Lynch, H., Page, S., Panariello, R. A., Tzitzouris, J. A., Giroux, D. 2019. The Revenge of the Stock Pickers.

Financial Analysts Journal, 75(2): 34–43.

5. Liu, Aqsa Manzoor, CangYu Wang, Zhang, Zaira Manzoor. The COVID-19 Outbreak and Affected Countries Stock Markets Response, Int. J. Environ. Res. Public Health 2020, 17, 2800.

6. Macciocchi, D.; Lanini, S.; Vairo, F.; Zumla, A.; Figueiredo, L.T.M.; Lauria, F.N.; Strada, G.; Brouqui, P.;

Puro, V.; Krishna, S.; et al. Short-term economic impact of the Zika virus outbreak. New Microbiol. 2016, 39, 287–289.

7. Manojkrishnan C G and Aravind M 2020 COVID 19: Effect on leading pharmaceutical stocks listed with NSE. International Journal of Research in Pharmaceutical Sciences, 11(SPL) (1), 31-36.

8. Wang, Y.-H.; Yang, F.-J.; Chen, L.-J. An investor’s perspective on infectious diseases and their influence on market behavior. J. Bus. Econ. Manag. 2013, 14, 112–127.

Webliography:

www.moneycontrol.com www.bseindia.com