[MEMO] The Myth of March Mayhem: Demystifying Nifty Returns Across Calendar Quarters
All about cyclicality, Month, Quarter or a leap year, does any of it mean anything to you?
The Indian stock market, with its vibrant history and dynamic nature, captivates the minds of investors and analysts alike. One topic that has recently been all over the social media is the performance of the Nifty 50 index across different calendar quarters.
Does a "March Mayhem" truly exist, where returns consistently tank in the first quarter? Are leap years cursed with market turmoil? And how does December stack up against its March counterpart?
Let’s answer these questions through data- drive investigation, analyzing 25 years of Nifty 50 data (1998-2023) and delving into the intriguing relationship between specific quarters and market performance.
March Mayhem: Fact or Fiction?
The popular narrative paints January as a month prone to sharp corrections and lower returns along with the 1st quarter being bad none- the- less. But does the data support this claim? Our analysis reveals a more nuanced picture. While March did indeed underperform December in 16 out of the 25 years, it wasn't the consistent villain you might expect. In 9 years, it actually outshone December, showcasing its potential for positive surprises.
Here are some observations and points to consider about the first calendar quarter:
Pre-2008: First quarters were generally more positive, with an average return of 8.4%.
Post-2008: Volatility increased, with greater swings in quarterly performance (both positive and negative).
Recent years: Returns have been less predictable, with moderate gains in 2021 and 2023, but losses in 2019 and 2020.
Interestingly, the "least performant quarter" title wasn't solely reserved for March. A closer look reveals Q2 (April-June) holding the dubious distinction of underperforming most often, claiming the bottom spot in 16 out of the 25 years. This implies that the first half of the year, in general, might be more susceptible to volatility, with both March and April-June vying for the unenviable title of "lowest returner."