Impact of GST 2.0, Tax Reforms, and Other Policy Interventions on Indian Stock Market Dynamics: An Econometric Analysis of Returns, Risk, and Volatility

Abstract

This study examines the significant influence of recent policy interventions and economic reforms—particularly GST 2.0 and broader tax reforms—on the behaviour of the Indian stock market. As an emerging economy, India is especially sensitive to policy changes, which can substantially affect market returns, risk, and volatility. Although economic policies in India have undergone continuous transformation, empirical evidence on the market impact of these recent reforms remains limited. Addressing this gap, the study econometrically evaluates both the short-run and long-run effects of major policy events, including GST 2.0, recent tax reforms, and other key interventions, on stock market returns, risk, and volatility. Using daily data from benchmark indices such as the Nifty 50 and Sensex, the analysis adopts a comprehensive methodological framework that includes event study techniques, GARCH-family models incorporating policy event dummy variables, and multiple structural break tests (Chow test, Zivot–Andrews test, Bai–Perron test, and CUSUM/CUSUMSQ). These methods facilitate accurate identification and measurement of structural shifts and market responses triggered by policy actions. The findings are expected to indicate notable changes in market dynamics, highlighting the role of policy decisions in shaping investor sentiment, risk assessment, and overall market stability. The study contributes valuable insights for policymakers in designing effective economic reforms and assists investors in managing policy-induced uncertainties in the Indian equity market.