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Assessing Market Liquidity Amidst Crisis: Evidence from Indian Stock Market

Author

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  • Sidharth J

    ((corresponding author) Madras School of Economics, Chennai, Tamil Nadu, India, 600025)

Abstract

Liquidity is very important for the stock market as it effects the portfolio decisions of investors and influences future outlook of the economy. Liquidity is especially important to withstand economic shocks and to facilitate faster recovery. The study examines the impact of two significant market crises, the 2008 Global Financial Crisis and the COVID-19 pandemic, on liquidity in the Indian stock market. Data for 655 companies listed at the National Stock Exchange (NSE) is utilized over a time period of 17 years from 2005 to 2022 to analyze multiple dimensions of liquidity. Preliminary results suggest that both crises had a substantial effect on market liquidity. The 2008 financial crisis exhibits a more pronounced and prolonged impact compared to COVID-19 pandemic. The severity of 2008 financial crisis surpassed that of COVID-19 across all liquidity dimensions. Trading volumes saw an uptrend during COVID-19 crisis, contrasting with decline in all other liquidity measures. Conversely, the 2008 financial crisis witnessed reductions in trading volume alongside broader declines in liquidity measures.

Suggested Citation

  • Sidharth J, 2025. "Assessing Market Liquidity Amidst Crisis: Evidence from Indian Stock Market," Working Papers 2025-283, Madras School of Economics,Chennai,India.
    • Handle: RePEc:mad:wpaper:2025-283
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    File URL: https://www.mse.ac.in/wp-content/uploads/2025/06/Working-paper-283.pdf
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    More about this item

    Keywords

    Liquidity; 2008 Financial Crisis; COVID-19 pandemic; Indian Stock Market;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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