Assessment of Risk Uncertainty for Budget Session: An Event Study of the Indian Stock Market

This study investigates the dynamics of risk uncertainty and volatility clustering over the period of 26 years (2000–2026). Using event study methodology, the study segments the market performance into two major Blocks, and furthermore each Block is divided into Eras to understand how the market behavior evolves over time. Block 1 represents the Historical Baseline, containing the Nifty 50 (benchmark) and Nifty Next 50 over the period of 26-years to understand how market efficiency has evolved. Block 2 represents Modern Strategic Era, which compares the impact of the budget announcements on the Nifty 50 and Nifty Next 50 in comparison with new indices: Nifty Alpha 50, Nifty Smallcap 100, Nifty Midcap 100, Nifty Dividend Opportunities 50 (Nifty Div Opps 50), and Nifty F and O. Empirical results for the Nifty 50 benchmark demonstrate volatility persistence and leverage effect using Exponential Generalized Autoregressive Conditional Heteroskedasticity (E-GARCH). The asymmetric parameter (γ) was estimated at -0.105585 in Era 1, confirming that the market reacted more strongly to the negative news than to the positive news of the same magnitude; this value shifted to -0.13406 in Era 5. Furthermore, GARCH coefficient (β) was estimated at 0.925225 (close to 1) in Era 1, suggesting the market historically exhibited higher volatility persistence compared to the β value estimated at 0.416201 in Era 5, signifying that the market has matured over-time and absorbs shock much more efficiently. Moreover, the presence of fat tails, as evidenced by Student’s t degree of freedom ranging from 10.24 in Era 1 to 3.57 in Era 5, underscores the recurring extreme outliers’ events associated with budget sessions. JEL Codes: G12, G14, C22, C58.