Impact of GST implementation: An event study approach based on the Indian stock market

Abstract

GST implementation in India is a macroeconomic event that changed the operating conditions and profitability of businesses. This study attempts to empirically test the market reaction of GST implementation on seventeen sectors of the Indian economy through the event-study methodology. Additionally, we assess the semi-strong efficiency of the Indian stock market during the event. Findings show that the event has heterogeneously affected different sectors as the FMCG sector is positively affected while the Pharmaceutical and Power sectors are adversely affected. IT sector is moderately positively affected whereas, consumer durable, energy, media, metal, oil, and reality are moderately negatively impacted. We also infer that the market doesn’t exhibit thorough efficiency of semi-strong form. The study is unique in its analysis of the sector-wise impact of GST implementation in India. This study is also useful for investors in making investment strategies and for policymakers to observe the policy impact on the stock market.