beyondbrics

Indians are fanatical about cricket: a game against Australia or Pakistan brings the country to a halt, as millions abandon daily duties and tune in instead.

But India’s performance in one-day cricket internationals also turns out to have a strong spillover effect in an unexpected area – the stock market.

In an upcoming article in the Pacific-Basin Finance Journal, Professors Russell Smyth and Vinod Mishra have found that India’s stock market tends to tumble if the Indian team loses.

The country’s main stock index dropped by an average of 0.231 per cent the day after an Indian loss. That’s a measurable impact more than seven times the impact of a win for India; the researchers found the latter had no statistically significant effect on share prices.

The researchers also found that the average drop following a loss was 18 per cent higher if the game came when Sachin Tendulkar (pictured, centre), known as the ‘master blaster’ for his batting acumen, was not playing.

“Behavioural finance suggests that large sporting events affect the sentiment of viewers-cum-investors, resulting in upward or downwards ‘mood swings’ in the market, which are reflected in stock prices,” Professor Smyth, the head of the economics department at Australia’s Monash University, explained.

He added that a loss could prompt sorrow, meaning that trading volumes fall as fans withdraw from the market temporarily, or anger, which could trigger impulsive selling.

Professor Smyth said:

When you are tuning in to follow how Australia performs against India in one-day internationals, before you write them off as meaningless matches, spare a thought for what the outcome might mean for Indian investors.

As the Bombay Sensex approaches a record high, the question is whether traders will still be subject to the same sporting mood swings,.

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