September sonnet for stocks: A sliding Sensex?

Going by history, the stock market could be in for some troubles as September has been the worst month historically for the bourses, but the analysts are still hopeful that the trend may be reversed this time around.

Moreover, the analysts here believe that September being the worst month of the year in terms of the benchmark index performance is more of a US phenomenon and the Indian market, being structurally different, might not follow the same trend.

According to an analysis of the the average monthly performance over the last 100 years of the Dow Jones Industrial Average, the benchmark index of the US market, the month of September has given the worst return with an average decline of 0.96 per cent.

The analysis shows that over the last 100 years, the month of September has recorded decline a majority of 58 times.

In September 2008, the Indian stock market benchmark Sensex fell by 1,704 points or 12 per cent, while DJIA declined by 666 points or six per cent.

Last September also recorded a complete collapse in the investor confidence levels worldwide, as the American banking giant Lehman Brothers went bankrupt and was followed by a series of high profile failures and heightened financial crisis.

Besides, the volatility tends to be the maximum during this month and it has been historically about 10 per cent higher than the previous month in the US stock market, as turbulence and fear grips the market with a bearish phase.

"One should execise caution as September tends to be a weaker month for stock market as history shows that the volatility in the US markets reaches its highest," SMC Global Vice President Rajesh Jain said.

However, others believe that the signs of improving economic growth rate scenario and the build-up in the investors' confidence should ward off the concerns in India.

"Volatility is already there in the market in the past few trading sessions. However, the scenario now is positive as the signs of faster economic growth is fuelling the market forward," Unicon Financial Chief Executive G Nagpal said.

Ashika Stock Brokers Research Head Paras Bothra also noted that at the current levels, instead of going down, there was more probability that the stocks would move up.

"Market has a habit of greeting investors with a surprise. But, there could be huge movement on the indices and volatility would be heightened," he added.