After the consecutive losing streak, what now?

The major frontline indices have gained by almost 0.6 per cent. Depending upon which of the equity indices you consider as proxy for the market, the latest consecutive fall in the frontline indices at the end of May 13, 2019 was one of the longest streaks of fall in the market. If you take Sensex as equity index, never before has the market fallen beyond nine consecutive days since the start of the index in 1979. The Sensex had witnessed continuous fall for nine days for the fourth time in its history of 40 years, the latest being as early as February 2019.

Nonetheless, if you take Nifty as a proxy for the market, its longest losing streak was for 10 days in a row. It fell continuously for 10 trading days from December 28, 1995 to January 10, 1996. During this time, Nifty lost 6.63% of its value.

Most of us are interested in knowing what would happen after such falls. Following such continuous fall, it has been observed that the index rises more than one per cent in the next trading session. However, it should not let you into a buying spree as it has been also witnessed that the reversion in trading happens for only two trading sessions, after which the market falls again.

Following table summarises the returns generated at various frequencies following a fall in the Sensex.