authors
Dhananjay Sahu and Meenakshi A Singh

abstract
The current study uses the daily return of the CNX Nifty Index from April 2017 to March 2019 (excluding holidays when there were no transactions) to investigate the impact of index futures contracts' expiration day on spot market volatility in the Indian stock market. The GARCH (1, 1) model that captures the heteroscedasticity in returns has been applied to study market volatility by using Nifty midcap index return as independent variables in order to remove the influence of market-wide factors price movement on CNX Nifty returns. The fact that there is a slight drop in volatility on the day when the index futures contract expires is sufficient evidence provided by the GARCH coefficient results. This suggests that in order to earn arbitrage profits, index arbitrageurs hold simultaneous positions in the cash and futures markets, which they unwind at the end of the derivatives contract trading period. Such trades that occur on one side of the market at contract close create a major order imbalance in the cash market, and the short-term mismatch between these orders can have a big impact on the underlying cash market's prices and volatility.