Does IPL Affect Stock Market Performance?
What do you reckon is the most celebrated festival in India? A festival that is celebrated by everyone regardless of religion and caste across the country. The answer is Cricket. And one of the most popular and fast-paced forms of cricket in India is the Indian Premier League- IPL.
The Indian Premier League (IPL) was founded in 2007 when On 13 September 2007, on the back of India’s victory at the 2007 T20 World Cup, BCCI announced a franchise-based Twenty- 20 cricket competition called Indian Premier League. “The IPL has been designed to entice an entire new generation of sports fans into the grounds throughout the country. The dynamic Twenty20 format has been designed to attract a young fan base, which also includes women and children.” — Lalit Modi during the launch of the IPL.
It wouldn’t be all too absurd to say that it affects our daily lives more than we know. One such aspect of our life that is greatly impacted by IPL would be the Stock Market. There are so many different aspects through which IPL affects our economy and in turn the Stock Market. Let’s have a look into how it can affect the inflow of investments.
It goes without saying that share trading is set on the back burner during the IPL season. But it still substantially influences the market trend. Now, a straightforward reason for this can be that feelings evoked from the tournament can act as a catalyst in the swaying moods of the for example, in 2009, price of DCHL stocks grew after the DC team won the title. DCHL stocks gained by 42 % after the victory of Deccan Chargers.
Also Read: What is Primary Market and Secondary Market?
Here are a few more aspects in which IPL has shown to affect stock market-
Matches help sponsors
The analysis of the data from ESPN Sports and National Stock Exchange of India shows that the mean daily returns during IPL are higher than annual mean daily returns. This simply means that stocks of companies who own/sponsor IPL teams perform better.
Better yet, take the example of the change in the performance of Reliance stocks. When Mumbai Indians won the IPL trophy in 2013, Reliance stocks performed substantially better. Prior to this, Reliance shares seemed to have been running in the red for three years consecutively. A similar trend was observed in the case of India Cements’ shares. These shares gained by 10 % when Chennai Super Kings, the team this company was sponsoring, lifted the IPL winning trophy.
Media Houses –
While we have seen BCCI selling the media rights to Star Sports for INR 16,347.5 crore for the global broadcasting rights i.e., TV & digital for 5 yrs. (2018-2022). This not only attracts more investors but also provides them with a ‘pitch’ to mull their stocks over. During this time, all streaming services/ apps that don’t telecast IPL also take a back seat and have to endure a decline in viewership.
IPL causes high returns –
In case of T-20 matches, the average stock market returns on the day following a loss were lower than the mean returns on the day following the game in which India won. After analysing this event, one can observe a significant difference in returns after the match from normal returns in 6 out of 60 T-20 games played by the Indian team. On an average, market returns following an IPL victory was found to be higher compared to rest of the year. To put it in a nutshell, short-term fluctuations tend to occur in investor sentiment, impacting the stock market during IPL season.
Moods guide decisions –
The team India’s performance in cricket matches also influences the Indian stock markets to a certain extent. Several non-economic aspects also affect the mood of individuals. Such fluctuations in mood swings impact investment decisions as well. People are often optimistic about their judgement because of the positive impact of victory of a favourite sports team on mood, whereas the loss results in pessimism and poor judgement.
Additionally, there is no denying that IPL has been contributing huge profits to the overall Gross Domestic Product (GDP) of the country. Large-scale branding, incessant support by fans, and enormous fan following across the globe have resulted in a consistent rise in the GDP. According to KPMG’s survey report, (appointed by the BCCI) the 60-day tournament generated INR 11.5 billion (USD 182 million).
Conclusion
We can clearly see how IPL and the following feelings may affect an investor and hence affect its decisions in trade sharing. Having said that, the audience primarily craves entertainment. It also acts as a catalyst, boosting stocks of several listed companies in the stock market. So, it is safe to infer that IPL does indeed, impact and influence the market.
