From pitch to profit: Exploring the correlation between IPL and Indian stock market

[vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_spacing=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1/1″ tablet_width_inherit=”default” tablet_text_alignment=”default” phone_text_alignment=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][vc_column_text css=”.vc_custom_1680330406964{margin-right: 16px !important;margin-left: 16px !important;border-right-width: 10px !important;border-left-width: 10px !important;}”]The largest cricket extravaganza in India has begun. As cricket has achieved a quasi-religious status in the country, it’s not far-fetched to speculate that it could also influence various aspects of Indian society, including the economy and, more specifically, the stock market.

Commonly, it is believed that share trading diminishes during the few months of the IPL. However, considering the significant presence of corporates in the event, it would not be erroneous to anticipate that there will be a great deal to observe in the financial market during the IPL months. Emotions often play a significant role in shaping investment decisions, and events such as the IPL can be a catalyst for altering investor sentiment due to the strong feelings associated with cricket. Let’s examine how this phenomenon may impact investments.

Impact of IPL on the Indian stock market: A look at historical trends

In some years, the IPL season has coincided with a bullish market, while in others, the market has remained bearish. Therefore, it would be incorrect to assume that the IPL season will always have a negative impact on the stock market.

2009: The SENSEX made an impressive 26% return during the IPL season in 2009. However, other factors such as the UPA-II government’s victory likely played a more significant role in this outcome.

2010: The poor performance of the SENSEX in 2011 may be attributed to the high inflation rate during the year. Despite this, it is worth noting that the IPL does have some impact on the stock market, as it can influence investors’ outlook and investment decisions. For instance, stocks of the sponsor company of the winning team may experience a surge in the market.

2015: During the IPL season of 2015, there was an uptick in the stock market. The BSE Sensex, which gauges the Bombay Stock Exchange’s progress, rose by approximately 3% throughout the competition. Post the tournament’s conclusion, this bullish trend persisted, with the index reaching an all-time high in May 2015.

2016: Conversely, in 2016, the market experienced a bearish trend during the IPL season. The BSE Sensex index dropped by roughly 4% during the tournament, as investors preferred to be cautious in their investment choices.

IPL’s impact on stock market during COVID-19

The year 2020 was different due to the COVID-19 pandemic, which caused a great deal of uncertainty and anxiety. It was uncertain whether IPL would take place at all. Despite the odds, the BCCI (Board of Control for Cricket in India) managed to host the IPL 2020 in the United Arab Emirates (UAE) from September 19 to November 10.

While the cricket tournament provided some entertainment for the people, it was a challenging time for the Indian stock market, which was already going through a tumultuous period due to the pandemic’s impact on the economy.

During the IPL season, the BSE Sensex index declined by 3%, in line with the overall market performance affected by the pandemic’s impact on sectors like travel, hospitality, and retail, which are significant contributors to the Indian economy. The uncertainty surrounding the pandemic led to cautious investor behaviour, while concerns over the teams’ performance in a foreign country added to the wait-and-watch approach.

Capitalizing on the IPL craze: How corporates benefit from IPL matches

The high viewership of IPL and its matches provides corporates with various benefits, including team sponsorships that help build brand recognition, advertising during matches to target specific audiences, hospitality packages that offer exclusive access to matches and networking opportunities, and cause-related marketing that supports worthy causes. These opportunities enable corporates to engage with their target audience, increase brand visibility and loyalty, and benefit from the massive viewership and popularity of the IPL.

Impact of IPL on mean daily returns of Indian stock market

Studies have shown that the IPL negatively affects the mean daily returns of the Indian stock market due to decreased trading volume during the league’s peak season. The negative impact is statistically significant, with studies reporting a mean daily return decrease of 0.58%. However, the impact is temporary and not uniform across all sectors. Some sectors may benefit from the IPL’s success. As the league continues to grow in popularity, its impact on the stock market remains an area of interest for researchers.

In summary, the impact of the IPL on the stock market is not a simple matter and should be analysed carefully by taking into account various factors. During IPL, a lot of listed companies are sponsors. Many times, the stock prices of these companies rise during the IPL. Investors can also track such sponsors and their stock price movements. Therefore, investors must exercise caution and make informed decisions based on thorough market analysis rather than solely relying on sentiment and emotion. By doing so, investors can navigate the complex relationship between the IPL and the stock market and make sound investment decisions

 

ABOUT THE AUTHOR

Ketan Sonalkar (SEBI Rgn No INA000011255 )

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

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