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The present study has investigated the day of the week and weekend effect on index returns and it’s volatility in the Indian stock market using GARCH (1, 1) for Nifty 50, Nifty midcap 50 and Nifty smallcap 50 indices. The study period starts from 1st April, 2005 to 29th June, 2018. This study found a strong evidence of a positive weekend effect as well as a negative Tuesday effect across all the 3 indices. It is observed that the returns on Tuesday are lower than the returns on Monday. The study also found a positive weekend effect (except Nifty 50) as well as a negative Tuesday effect on return volatility for all these 3 indices. Like return, it is also observed that market is less volatile in Tuesday than Monday. In addition to this, the present study also revealed a negative Thursday effect on return (except Nifty 50) as well as a negative Friday effect on return for Nifty smallcap index only. It is concluded that Monday is a high risk and high return day whereas, Tuesday is a low risk and low return day in comparison to Monday. If traders can take higher risk they can earn higher return on Monday. The overall findings of the study suggest that the Indian market is not efficient and market can be predictable based on historical series. The findings of this study is valuable to both academicians as well as the market participants.
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