Impact of Demonetization on Indian Stock Market-An Empirical Study

In order to examine the Indian stock market reaction to demonetization with a sample of 51 stocks using the standard event study methodology, the hypothesis that abnormal returns on and around demonetization are equal to zero has been tested. The empirical results infer that the significant average abnormal returns and cumulative average abnormal returns around the demonetization date rejects the null hypothesis. The study further indicates that demonetization has affected the abnormal returns on stocks traded on the NSE. It is concluded that demonetization has had positive impact on the stocks of the financial services sector, the information technology sector and the energy sector while negative impacts on the stocks of the automobile sector and the consumer goods sector