Is this exciting times for the Sensex yet again. With just eight trading sessions left for trade to kick in next month, expectations galore for a repeat performance in December.
The closing month of the year has historically been favourable to stock markets, especially Sensex, which has registered positive gains in the range of 0.29 per cent to 15.74 per cent. It has been witnessed that Sensex has generated positive average returns of about 5 per cent in 18 out of 22 instances (82 per cent of the time).
Since liberalization of Indian economy in 1991, there are only four instances when Sensex has posted negative returns in December. In the past 20 years, 1994, 2000, 2001, and 2011 have posted negative returns of 4.78 per cent, 0.65 per cent, 0.77 per cent, and 4.15 per cent respectively. Hence, if history repeats itself then December should prove good for bulls.
Yet, all may not remain well if the markets fail to take off on certain cues. These cues will emerge from the major macro-economy data points which are scheduled for release in December. These include trade figures for the month of November on December 10, IIP for the month of October on December 12, CPI inflation for the month of November on December 12, WPI inflation on December 16, and the mid-quarter review of Monetary Policy on December 18. Further, the winter session of the Parliament begins from December 5 followed by the results of five state assembly elections on December 8.
Moreover, the stock markets movement might depend on the decision made by the US Federal Reserve (Fed) regarding the quantitative easing programme. Fed is meeting tonight (November 19, 2013) and the minutes will be released tomorrow.
In the past few months, Fed has delayed the tapering of its stimulus programme. This has boosted the market sentiment since September 2013. Foreign Institutional Investors (FIIs) have invested Rs 18,012.8 crore and Rs 12,632.9 in the month of October, September respectively. Likewise, nearly Rs 5600 crore of net inflows have been witnessed in the ongoing month of November.
Owing to strong FII inflows of late, Sensex has touched life time high levels of 21,321.53 on November 3, 2013. It was a special trading session known as Muhurat trading when markets closed at levels of 21,239.36. Bullish on the markets, Deutsche equities has reiterated the December 2013 Sensex target of 22,000.
Markets are looking poised to touch new highs. A K Prabhakar, independent market expert, said, “Markets are on the verge of major break-out above triple top of 6357. If we are able to cross levels of 6357 in November then December may witness more than 5 per cent average gains.”
“FII flows have been very good (YTD) when compared with other emerging economies and this trend will continue till 2013 end. Election results and Parliament session are generating high hopes and if government can push few reforms then one can expect Nifty to close above 6800 levels by the year end,” he added.
The results of state assembly elections may set the tone for the markets in December. Avinash Gorakshakar, research head, miintdirect.com, said, “Whatever happens on the political front is also important this time and December 8 is going to be an important date. However, November has been good for the markets and the momentum may continue till the end of December. Lot of liquidity is still there in the markets.”