[Nishad et. al., Vol.3 (Iss.12): December, 2015] ISSN- 2350-0530(O) ISSN- 2394-3629(P) Impact Factor: 2.035 (I2OR) DOI: https://doi.org/10.29121/granthaalayah.v3.i12.2015.2899 Http://www.granthaalayah.com ©International Journal of Research - GRANTHAALAYAH [142-149] Management HOW VOLATILE IS INDIAN STOCK MARKET? A STUDY BASED ON SELECTED SECTORAL INDICES T. Mohamed Nishad 1 , K.T. Thomachan 2 1 Assistant Professor, Department of Commerce, Farook College, Kozhikode, INDIA 2 Associate Professor, Department of Economics, St. Joseph’s College, Devagiri, INDIA ABSTRACT This paper examines the nature of volatility of selected sectoral stock indices traded in the National Stock Exchange. Using the EGARCH model introduced by Nelson, it has been observed that the selected indices are subject to Autoregressive Conditional Heteroskedasticity (ARCH) effects. There are significant leverage effects in the case of five indices. Volatility seems to be highly persistent in the case of all the indices except one. Moreover, four indices are highly sensitive to market events. Keywords: Autoregressive Conditional Heteroskedasticity, Exponential ARCH, Volatility. Cite This Article: T. Mohamed Nishad, and K.T. Thomachan, “HOW VOLATILE IS INDIAN STOCK MARKET? A STUDY BASED ON SELECTED SECTORAL INDICES” International Journal of Research – Granthaalayah, Vol. 3, No. 12(2015): 142-149. 1. INTRODUCTION Savings are generated when a person or an organization abstains from present consumption for a future use. Investment involves the commitment of resources which have been saved in the hope of some positive return. Donald E. Fischer and Ronald J. Jordan defined investment as “a commitment of funds made in the expectations of some positive rate of return.” The objective of investor is to maximize the return and minimize the risk from investment. Our savings as cash are not only a deadwood as they don’t earn anything, but also lose its value to the extent of rise in prices. So savings are invested to provide hedge against inflation. One may invest in physical assets or financial assets. A physical asset is an item of economic, commerce or exchange value that has tangible or material existence. For example, Land & Building, Gold, Silver etc., financial asset is an asset that derives value because of a contractual claim. For example, Govt. securities, Post office savings, Fixed deposits, Bonds, Mutual funds, shares etc.,