Sensitivity of Stock Pricing to the Optimistic and Pessimistic Sentiment of Social Media: A Shreds of Evidence from Nifty Indices

With technological advances, share prices are becoming increasingly volatile. In the context of these unpredictable trends, businesses, investors, and consumers use social media to make investment decisions or share their thoughts and opinions. In this article, we explored the impact of social media news on equity prices through sentiment analysis. Sentiment analysis indicated how social media impacted the sentiments (both optimistic and pessimistic) of the investors when there was the dissemination of specific news on social media related to a particular sector or stock. The present study analyses the positive and negative sentiments in the stock market created by social media. The observation of NIFTY indices for five categories was constructed and analysed. The impact of investors’ positive and negative feelings emerges from the spread of social media stock prices in the Indian market. We collected data on stock price changes in the top five companies across five Nifty index categories in the last quarter of FY 2020–21, i.e. 21 January–21 March, when the effects of a pandemic had diminished, and industries were slowly returning to normal. Share price movements are tracked in three ways, i.e. percentage change in the price, average changes in a normal situation, and average percentage increase or decrease in the last three months. Based on the computed values, the correlation between expected and observed changes was tested using the chi-square test. The test result indicates the sensitivity of stock pricing to the optimistic and pessimistic sentiment of social media with at least a 10% change in stock price.