The launch effect of thematic indices: do themes move markets?

Purpose This study examines the Indian stock market’s behaviour in the short run following the launch of capital market-themed indices, such as the Nifty Capital Market Index (Nifty CM) and the BSE Capital Markets and Insurance Index (BSE CAPINS), assessing how quickly public information is reflected in prices in line with the semi-strong form of market efficiency. Design/methodology/approach This study adopts an event study methodology to analyse the short-run stock market response to the rollout of the Nifty CM and BSE CAPINS indices. Findings The launch of the Nifty CM elicited a negative market response, suggesting a “buy the rumour, sell the news” phenomenon, potentially driven by profit-taking or apprehensions about increased regulatory scrutiny. In contrast, the BSE CAPINS witnessed a positive response, indicating strong investor enthusiasm on the day of its launch. These contrasting outcomes underscore how investor expectations and sector dynamics shape market responses to new indices. Originality/value This study addresses a gap in the literature by examining the launch of capital market-themed indices in India, offering novel insights into their announcement effects within the context of an emerging market. The study shows that the Nifty CM and BSE CAPINS indices elicit contrasting market reactions, providing fresh insight into how theme design and sector focus influence investor behaviour.