Impact on Stock Price By the Inclusion and Exclusion from National Stock Exchange CNX Nifty

Abstract

Changes in an index are a regular phenomenon and these take place due to the inclusion and exclusion of tocks from the index. The inclusion or exclusion of stocks creates great impact on the va lue of the firm. However, the e changes are simply a short-lived event with no permanent valuation effect. The present research study analyzed the effect of the inclusion or exclusion of certain stocks from the National Stock Exchange CNX Nifty Junior Index. The study found that on an average, no permanent effects were observed on stock prices. It is also found from the stud y that the National Stock Exchange (NSE) reacted unfavorably to the inclusion and exclusion of stocks and it might not be possible to ea rn any excess returns where the particular stocks have been included or excl uded from the index. The study supports the Price Pressure Hypothesis due to changes of inclusion or excl usion.