Is BSE Sensex Resilient to Macroeconomic Shocks? An Analysis of Pre-COVID and Post-COVID Periods

Abstract: This study examines how stock prices react to the shocks of macroeconomic factors. The sensitivity of the Bombay Stock Exchange (BSE) Sensex towards interest rate, inflation, exchange rate, and foreign institutional investment is tested by estimating quantile regression models for the pre-COVID-19 period and post-COVID-19 period. The pre-COVID-19 covers monthly data from March 2016 to March 2020 and post-COVID from April 2020 to October 2023. The findings demonstrate that interest rate, inflation, and currency exchange rates were significantly influencing stock prices before COVID-19. However, after the breakout of the COVID pandemic, only inflation remained significantly influencing stock prices. Results imply that the stock prices have become more resilient to macroeconomic volatilities after the COVID-19 crisis. The study offers insightful information to investors and policymakers on the dynamic relationship between macroeconomic variables and stock market performance before and after the pandemic. Keywords: BSE, Sensex, Market Resilience, Stock Price, Macroeconomic Impact, Quantile Regression JEL Classification Number: G1, G10, C13