30 January 2011

Seasonal Effect : February

Earlier I pointed out that February is the most bullish month for Indian Equities, it was a perfect example of how data can be misinterpreted! Lets get deeper into February performance and see why few data points can create a bad factual statement.

Apart from the "Liberalization" budget of 1991 and 1992, the run-up to the budget has been quite moderate, nothing to make an outright statement on the myth of budget rally. Also if you see the 5 period moving average, it has consistently dwindled down and has just slipped into negative. I think in year 2011 also given the global overbought conditions and cautious stance maintained by larger players on Emerging and Indian equities the chance of a runaway rally is quite feeble. Also there is much larger fear of Inflation eating into corporate profits than hopes of a growth oriented budget.

Above is the chart showing the effect of dates on returns, it is hardly showing any pattern except for that it is completely random!

These kinds of seasonal analysis should not be taken seriously, but its always good be in a position to have a small knowledge than nothing at all.


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