Price Return Dynamics in the Indian Stock Markets: Evidence from Large-Cap and Mid-Cap Stocks

Abstract

India is one of the fastest-growing economies in the world and a global investment powerhouse. At the centre of this development stands the Indian Stock Market with the two prominent stock exchanges, BSE and NSE, powering its growth. It is important to understand and analyse companies' performance and how their stocks are performing. This study examines data from over 200 large-cap and mid-cap stocks to test whether stock price level predicts 365-day returns across price-capitalisation categories, challenging conventional low-price anomaly expectations in emerging markets. Descriptive and Inferential statistics have been carried out to understand the performance of large-cap and mid-cap stocks. A significant performance divergence between Large Cap High Price and Mid Cap Low Price was found. Furthermore, a weak inter-category relationship between the two categories is found and price significantly predicts returns within specific segments. Hence, the findings of the study challenge the Low-Price Anomaly theory and the Efficient Market Hypothesis assumptions.