EFFICIENCY OF THE INDIAN STOCK MARKET - AN EMPIRICAL STUDY

Market efficiency has an influence on the investment strategy of an investor because if the market is efficient, trying to pick undervalued security will be a waste of time. In an efficient market, there will be no undervalued securities offering higher than deserved expected returns, given their risk. On the other hand, if markets are not efficient, excess returns can be made by correctly picking the security. In this paper, an analysis of five popular stocks is carried out to test the efficiency level of the Indian Stock market in semi-strong form and the random walk nature of the stock market by using the event analysis and t-test for the period from 1^st April 2016 to 31^st March 2017. The study carried out in this paper has presented evidence of the inefficient form of the Indian Stock Market in a semi-strong form. From the event analysis and t-test, we are able to conclude that the series of stocks in the Indian Stock Market is biased random time series. It indicates that the behaviour of share prices does not confirm the applicability of the random walk model in the Indian stock market. Thus, undervalued securities are in the market, and the investors can always get excess returns by correctly picking them.