Team India's form affects stock market: Study

Updated: 06 October 2010 06:48 IST

Here's yet another reason why the Indian cricket team should keep the winning streak alive, particularly when legend Sachin Tendulkar is in the side.

Team India's form affects stock market: Study

Melbourne:

Here's yet another reason why the Indian cricket team should keep the winning streak alive, particularly when legend Sachin Tendulkar is in the playing side - it's poor performance can affect the country's stock market, says a new study, led by an Indian-origin economist.

With the Australian cricket team touring India, Dr Vinod Mishra and his colleague Prof Russell Smyth at Monash University have found that the "poor" performance of India, in oneday matches mainly, can significantly impact on fortunes of the Indian stock market.

"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.

"India's main index, the CNX Nifty show 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," Prof Smyth said.

Furthermore, when Sachin Tendulker is playing in the losing side, the loss on the stock market could be 20 per cent more, say the economists.

Prof Smyth said: "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.

"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 large sporting events affect the sentiments of viewers cum investors resulting in upwards or downwards 'mood swings' in the market, which are reflected in stock prices."

According to the economists, the emotional areas of the brain are nearby and when the mood is low, emotions can impact normally objective decision making, despite economic decisions being made in the frontal lobe of the brain.

"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 the stocks.

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



Topics : Cricket
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