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<p>The nexus of policy uncertainties and financial markets has in recent years garnered notable empirical investigations, as the unpredictability of policy possesses significant effects on investment and market stability. However, empirical evidence on sector-specific responses within financial markets to economic policy uncertainty is limited. This study utilized the autoregressive distributed lag (ARDL) model and wavelet coherence analysis to examine the temporal and frequency relationship between global and country-specific economic policy uncertainties and the performance of India's sectoral and aggregate stocks, using monthly data spanning from 2003M1 to 2024M6. The empirical analysis from the two methodologies shows related results. Majorly, evidence of a long-run relationship was found between uncertainties and stock performance of the energy and fast-moving consumer goods (FMCG) sector as well as the aggregate exchange market, with adverse effects from domestic uncertainties. Also, there is a short-run significant heterogeneous detrimental effect of global and domestic uncertainties on sectoral stock performance with resilience of the IT sector to domestic policy change. The findings suggest that the effects of both global and country-specific economic policy uncertainty on the performance of sectors and the aggregate market are short-lived. The implications of our findings are discussed for investors and policymakers on navigating uncertainties in the stock market.</p>

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Highs, lows, and uncertainty: a deep dive into India’s stock market and policy uncertainty

  • 期刊论文

  • 出版模式：

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  • 发表日期：

    2025年10月6日

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  • Sodiq Olaide Bisiriyu,
  • Nafeesathul Basariya Mohamed Ismail,
  • Rukma Ramachandran

摘要

The nexus of policy uncertainties and financial markets has in recent years garnered notable empirical investigations, as the unpredictability of policy possesses significant effects on investment and market stability. However, empirical evidence on sector-specific responses within financial markets to economic policy uncertainty is limited. This study utilized the autoregressive distributed lag (ARDL) model and wavelet coherence analysis to examine the temporal and frequency relationship between global and country-specific economic policy uncertainties and the performance of India's sectoral and aggregate stocks, using monthly data spanning from 2003M1 to 2024M6. The empirical analysis from the two methodologies shows related results. Majorly, evidence of a long-run relationship was found between uncertainties and stock performance of the energy and fast-moving consumer goods (FMCG) sector as well as the aggregate exchange market, with adverse effects from domestic uncertainties. Also, there is a short-run significant heterogeneous detrimental effect of global and domestic uncertainties on sectoral stock performance with resilience of the IT sector to domestic policy change. The findings suggest that the effects of both global and country-specific economic policy uncertainty on the performance of sectors and the aggregate market are short-lived. The implications of our findings are discussed for investors and policymakers on navigating uncertainties in the stock market.