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The holiday effect?

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Happy Dussehra and Shubho Bijoya!

The only dip this week has seen is that of our moods with the week-long festivities (and the long weekend) finally coming to an end today. Well, it’s been quite a week, hasn’t it? Markets saw record highs with benchmark indices soaring at closing time on Thursday. Guess the Indian stock market was not exempt from the infectious mood of the festivities, either!

However, do you think this is the ‘holiday effect’?

The ‘holiday effect’ is a popular term used by investors to describe a pre-holiday markets anomaly. It is the tendency for a stock market to gain on the final trading day before a mandated long weekend or holiday. Although this anomaly has been most significantly observed in European and US markets (especially before Black Friday, Christmas, and New Year), it can be applied to any stock market just like other theories.

The holiday effect is attributed to simple optimism and high spirits among investors. Another fundamental reason for this attribution is that consumers tend to spend more over holidays. This can push up the share prices of retailers in particular.

In India, there’s no significant trend or conclusive data that can establish this relation, but investors have long debated the presence of this effect. This year it seems like the holiday effect could be a possible explanation for the soaring markets before Dussehra. However, experts say that it could also be the central bank’s assurance on liquidity, easing inflation, and an emergency nod for a COVID-19 vaccine for kids.

Markets Last Week

Nifty 50

18,338.55

2.48% ▲

Sensex

61,305.95

2.08% ▲

Nifty 500

15,769.25

2.63% ▲

Bank Nifty

39,340.90

4.14% ▲

Another week went by, another record close for the Indian bourses. The Nifty 50 index topped the 18,000 mark for the first time to touch all time highs. From a sectoral point of view, the frontliners were Nifty Auto Index which was up around 7%, Nifty PSU Index up about 6.5%, and Nifty Metal Index ending almost 6% higher.

As far as the macroeconomic data is concerned, inflation softening to 4.35% last month and Industrial Production touching pre-pandemic levels in August was well received by the equity markets. Albeit, circumspection around the Federal Reserve tapering doing rounds globally, markets are pricing in the preparedness and resilience of our markets to withstand any adverse pressure.

Lastly, on institutional activity, we continue to see a divergence in extreme degrees. Foreign Institutional Investors (FIIs) were net buyers for the week to the tune of ₹1037 crores in the cash market, while Domestic Institutional Investors (DIIs) were net sellers approximating ₹3296 crores.

In the Spotlight

The Q2 FY22 earnings kick-started with the large-cap IT names like Infosys, Wipro, and HCL reporting rise in consolidated revenues. The IT sector results mirrored the buoyant sentiment in the market. For example, Infosys beat street estimates, with a 4.3% rise in consolidated net profit and a 6.1% rise in consolidated revenues on a quarterly basis, while Wipro saw its consolidated net profit decline by 9.6% sequentially, but consolidated revenue rising 7.7% on a quarterly basis.

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Well, that’s a wrap for the week! Make sure you stay hydrated and make the most of the last day of festivities for now. And in that same spirit, don’t forget to make the most of the markets too.

Until then, take care and happy investing!

Deblina

Senior Marketing Associate by day; obsessive organiser by night. Stories and cats shall take over the world. 🏳️‍🌈

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