Market Reaction to AI-Related Announcements in the Indian Stock Market: An Event Study Approach

Abstract

Artificial Intelligence (AI) has been a game-changing technology with immense influence on the strategies and operations of the firms in the corporate world. The rise in usage of Artificial Intelligence by top players has attracted the interest of many investors, who are concerned about the issue of whether Artificial Intelligence news makes immediate value to their stockholders. This paper studies the stock market reaction to Artificial Intelligence news in the Indian stock market using the event study approach. The analysis looks at the effect of AI news announced by four major companies in India, that is, Tata Consultancy Services (TCS), Infosys, Reliance Industries, and HCL. Daily stock returns and NIFTY 50 Index returns have been used to determine abnormal returns using the market model. An event window of (-5, +5) days is taken into account to assess the stock market reaction to the announcement. It can be observed that there is no consistent impact on the stock markets based on the information provided by AI companies. Infosys has had a positive cumulative abnormal return, which implies favorable investor perception, whereas TCS, Reliance Industries, and HCL have all had negative cumulative abnormal returns. Based on the above calculations, it can be concluded that the overall CAAR of -0.008564635 is slightly negative during the event period. However, significance test results imply that the abnormal returns are insignificant for any of the selected companies. The analysis reveals that AI announcements have a different impact on investor sentiment, but abnormal stock returns remain insignificant.