Bulls May Continue Their Celebrations Beyond Holi!
Holi, the vibrant festival of colours, music, dance and sweets is here. Well, Dalal Street witnessed early Holi celebration with investors dancing to the melody of the bulls and fetching sweet returns on their investments. However, while Holi is celebrated with diversity of colours, investors on D-Street celebrated it with only green color. As the benchmark indices rallied to register a 7-month high, the key impetus driving the boom is the prospect of a mega-win for the BJP in the forthcoming general elections, strong FII inflows, rupee appreciation and global investment bank Goldman Sachs upgrading Indian stocks to “Overweight”.
Once the Holi celebrations are over, the twelfth season of the Indian Premier League is set to start from March 23. Cricket has been no less than a festival in the cricket-crazy nation like India. It is that time of the year when you look forward to watching the Helicopter Shot, while restaurants, clothing, even birthday parties, cakes and everything else is themed around IPL. Considering the immense popularity of cricket in India, we believe that there will be much to look out from an equity market point of view in the coming IPL edition.
It would be interesting to look at the historical performance of the Indian equity markets one month before the IPL, during the period of IPL and one month post IPL. Theodore Roosevelt had once said, "The more you know about the past, the better prepared you are for the future."
If we look at the table, the one month before IPL period has been majorly dominated by the bulls. Out of 12 instances, the NIFTY has given positive returns 10 times with 2013 and 2015 being the exceptions. In the year 2009, a whopping 17 per cent were generated by the markets one month before the IPL. During the IPL period of 2009, the returns were maximized, but this was more to do with the victory of UPA-II government in the general elections. Also, during the IPL period of the last 11 editions, 7 have fetched positive returns with 2009 and 2014 leading with highest gains, 2009 had to do with UPA-II victory. The year 2014 had more to do with the historic win for the Bharatiya Janata Party, which transformed the political landscape of world’s largest democracy. Considering that this being an election year, will the bulls repeat the trend by marking positive returns on all counts, like we saw in 2009 and 2014? If this time does not turn out to be different, the good times may continue for the Indian stock markets, making way for a new all-time high. Considering the above data, we may conclude that in a majority of the times one month before the IPL and during the IPL period, the bulls have had a prosperous run.
Going ahead, the US Fed’s policy making arm, the FOMC, would command the attention of the investors. While an interest rate hike seems to be unlikely, there is still quite a bit for investors to keep their eyes on, such as balance sheet reduction plans, forecasts on certain macroeconomic data and the policy statement. Also, investors will monitor US-China trade talks and Brexit developments.
