Linkages Between Festivals and Stock Market Returns: A Study of Indian Stock Market

[Purpose] The aim of this paper is to analyse the performance of the Nifty 50 and selected sectoral indices. Further, an attempt is made to examine the effect of various festivals on the performance of these indices. [Design/methodology/approach] For study purposes, closing prices of Nifty 50 and selected sectoral indices have been collected from the NSE India for the period of January 1, 2016, to December 31, 2021. The study employs descriptive statistics to know about the sample mean, standard deviation, sample variance, maximum, minimum, skewness, and kurtosis. Paired t-test was used to compare the returns of indices before and after the festival. Unit root test was used to test stationarity. Finally, the Granger causality test was applied to study the relationship between the Nifty 50 and sectoral indices returns. [Findings] According to this study, higher returns have been found for indices during Ramadhan and Christmas. Investors purchasing and selling behaviour is more positive during these times. During the pre-covid 19 period, Christmas is the only festival that shows positive returns in all sectoral indices. There is a positive return of all indices on Ramadhan and Diwali days during covid 19 period. The paired sample t-test showed that among all the festivals, Diwali is the only festival, which has an impact on the Nifty 50 and Nifty Auto index. The Granger causality test discovered a bidirectional relationship between Nifty Oil & Gas and Nifty health care, as well as Nifty 50 and Nifty Bank. [Originality/value] Festivals are one of the factors that attract investors into the market. It implants a positive attitude in the minds of investors. Decision science enables investors to analyse, quantify, and track the performance of their investments in different sectors. The findings of the study would be useful to investors, to come up with some investment strategies and maximize their returns during the festival season. Fund managers can restructure and allocate their funds based on sectoral indices performance.