Abstract: This study explores whether herding behaviour exists in the Indian stock market over the period January 2022 to December 2024. Using daily sector-level returns and the Cross-Sectional Absolute Deviation (CSAD) approach, we tested whether investors tend to follow market-wide movements, and how volatility shapes this behaviour.
The results show no strong evidence of herding at the aggregate level. While the squared market return term was negative as expected, it was not statistically significant. Instead, investors appeared to act more independently, suggesting that the market has matured in recent years. Interestingly, volatility was found to have a significant positive effect on return dispersion, meaning that during periods of higher uncertainty, investors responded in more diverse ways rather than moving together.
The findings point to a more rational and resilient Indian equity market, where information availability and institutional participation reduce the chances of herd-driven distortions. These insights are useful for investors, fund managers, and regulators seeking to understand behavioural patterns and market efficiency in emerging economies.

Keywords: Herding behaviour, CSAD model, Investor behaviour, Market volatility, Indian stock market, Market efficiency

Downloads: | DOI: 10.17148/IARJSET.2025.12902