Impact of Russian Invasion of Ukraine on Indian Stock Market: An Event Study

Abstract

Prior literature investigating the link between political uncertainty and financial market performance finds that fear of political instability has a significantly negative effect on both the stock market return and the risk profiles of financial assets. As the Russian invasion of Ukraine in 2022 is a recent and ongoing event, there is limited literature available of its impact on the Indian stock market. Several studies have explored the relationship between invasions and the stock market, with most of them focusing on the impact of external invasions. Previous studies found that the invasion had a significant negative impact on the stock market, with higher levels of uncertainty leading to increased volatility and a decline in stock prices. The literature suggests that invasions, whether external or internal, can have a significant impact on the stock market. While there is limited research available on the impact of the Russian invasion of Ukraine in 2022 on the Indian stock market, it is possible to speculate on the possible channels through which the invasion could impact the Indian market. To examine the correlation between the Russian invasion of Ukraine and fluctuations in the Indian stock market, a comprehensive analysis of data was conducted using econometric techniques. The analysis revealed a significant impact of the Russian invasion on the Indian stock market. The findings indicated that the announcement of the Russian invasion had an immediate and adverse effect on the Indian stock market.