Impact of demonetization on the indian stock market returns and volatility

Demonetization ofold currency notes ofdenomination ofrupeesfive hundred and rupees one thousand cam as an announcement by the Indian Prime minister, Sh. Narendra Modi on November 8^th 2016. The currency notes of these denominations were drawn out of circulation and cannot be used as an official mode of payment. Demonetization is one ofthe historic moves initiated by Government to address the much bothering issues like black money & fake currency in circulation, address corruption & terrorism. The aim of this article is to study the impact of demonetization on Indian stock market returns and volatility as a whole and on banking sector which is expected to benefit from such move. The study employs data corresponding to two time periods, from 25^th October 2016 to 25^th November 2016 and second from 1st january 2016 to 30^th June 2017 so as to study both the immediate effect and delayed impact on the risk and return. The studyfound no significant impact ofdemonetization on returns ofthe overall economy as well as banking sector but the volatility ofthe economy and that of banking sector has been reported to have declined.