Patterns exist everywhere, more so in the stock market. The study of different patterns gives us vital information which can be used to forecast the future. In the table below, monthly closing prices for the SENSEX index have been considered for the months of December to March. The recorded data is for the previous 10 years.
| Year | December (A) | January (B) | February (C) | March (D) | (D) – (A) | (B) – (A) |
| 2022 | 58253.82 | 58014.17 | 56247.28 | 58568.51 | 314.69 | –239.65 |
| 2021 | 47751.33 | 46285.77 | 49099.95 | 49509.15 | 1757.82 | -1465.56 |
| 2020 | 41253.74 | 40723.49 | 38297.29 | 29468.49 | -11785.3 | -530.25 |
| 2019 | 36068.33 | 36256.69 | 35867.44 | 38672.91 | 2604.58 | 188.36 |
| 2018 | 34056.83 | 35965.02 | 34184.04 | 32968.68 | -1088.15 | 1908.19 |
| 2017 | 26626.46 | 27655.96 | 28743.32 | 29620.6 | 2994.14 | 1029.5 |
| 2016 | 26117.54 | 24870.69 | 23002 | 25341.86 | –775.68 | –1246.85 |
| 2015 | 27499.42 | 29182.95 | 29361.5 | 27957.49 | 458.07 | 1683.53 |
| 2014 | 21170.68 | 20513.85 | 21120.12 | 22386.47 | 1215.79 | –656.83 |
| 2013 | 19426.71 | 19894.98 | 18861.54 | 18835.77 | –590.94 | 468.27 |
The following can be understood from the above data:
1. Generally, in March it is observed that SENSEX is higher in points as contrasted with December. Only under exceptional situations, the index falls in March as compared to its December figures like the Covid pandemic in 2020, the recession in 2018, a business slowdown in 2016, etc.
2. Investments if made in the month of December in the stock market are likely to show higher valuations in the month of March, such has been the case 60% of the time.
3. It should be worth keeping in mind that RBI has projected a fall in inflation in the coming months to 6%, and if this positive sentiment continues, we may see another year of SENSEX being higher in March as compared to December 2022.
4. However as contrasted with December, January tends to show a dip which can be observed since the year 2020. Before that year, the index has shown a positive increase.
5. Noting a change in this trend since the last 3 years, it is probable that the same trend may continue this year as well.
Important events that occur in this quarter, which may have a bearing on the stock market are listed below:
Budget – The budget is announced on February 1st every year, which directly impacts the stock markets. This year’s budget is important as it is the last full year’s budget by the current central government before the 2024 general elections. Volatility can be expected from 30th January 2023 till 3rd February 2023, in reaction to the budget released.
Tax planning – The financial year ends on 31st March every year. By February end, a rather clear picture on the income of the previous year is known to the taxpayers. Therefore, a lot of tax planning in terms of investments in tax-saving instruments is undertaken by individuals and businesses. This impact can be felt not only on incomes but on the stock market as well, as money may move from stocks to these tax planning instruments.
Lowering luxury expenses– As people start tax planning, available income is invested in larger amounts resulting in lower expenses. There being lesser money to spend on necessities, leisure and luxury now, several individuals as well as businesses face cash crunches. Having proper savings in order is a necessity in January till March.
Conclusion:
A fall in the January monthly SENSEX closing price is highly probable as contrasted with December 2022. Also, the probability of March 2023 doing better than December 2023 is high unless there are any exceptional global events. Keeping in mind the events occurring in the month of March will help you plan your last quarter of the financial year better.
Researched & Written by
CS Renucka Vaiddya &
Kedar Nadgonde (Financial Analyst & Coach )
Author Bio
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