Stock markets decline when India loses ODIs: New study

Last Updated: Oct 06, 2010, 13:30 PM IST

Washington: New research shows that when India`s cricket team loses one-day internationals, the stock market takes a beating, but if master blaster Sachin Tendulkar is on the losing side, the damage to the bourses is even worse.

Research by economists Russell Smyth and Vinod Mishra of Monash University, in Australia, suggests the performance of the Indian cricket team in one-day matches can significantly impact the fortunes of the Indian stock market, an official release said.

"While a win by the Indian cricket team has no statistically significant upward impact on stock market returns, a loss generates a significant downward movement in the stock market," Smyth, the Head of Monash University`s Department of Economics, said.

"India`s main index, the CNX Nifty, shows that the Nifty index was generally flat the day after a win, but the day following a loss, the index dropped by an average of 0.231 per cent. The drop following a loss was more than seven times greater than the movement following a win," Smyth said.

Furthermore, when Sachin Tendulker, India`s most popular cricketer, is on the losing side, the loss on the stock market is almost 20 per cent more.

"In the 100 matches in which Tendulkar played and India lost, the average return the day after the match was 0.328 per cent, an 18 per cent higher drop compared to the average drop after losing a match (which Tendulkar did not play)," Smyth said.

"A sporting event is a non-economic phenomenon and, as such, one might expect that stock prices will not be affected. However, behavioural finance suggests that large sporting events affect the sentiment of viewers-cum-investors, resulting in upwards or downwards `mood swings` in the market, which are reflected in stock prices," Smyth said.

According to Smyth and Mishra, emotions can impact normally objective decision-making, the university release said.

"A feeling of sadness might make investors withdraw from the world and the stock market, thus resulting in reduced trading for a while, whereas anger might make them behave in an impulsive manner, which might involve selling of a lot of the stocks," Smyth said.

"When you are tuning in to follow how Australia performs against India in one-day internationals, before you write them off as meaningless matches, spare a thought for what the outcome might mean for Indian investors," Smyth said.

PTI