Rough September for Dalal Street? Here's what last decade's data suggests

Over the past decade, September has remained a mixed bag for Dalal Street investors as the ratio of positive and negative returns remained 1:1.
In the last ten years, the Nifty50 index delivered positive returns five times in September but settled in red on an equal number of occasions.

Historically, for the US markets, September is considered to be the worst month for equities, but the Indian stock market doesn't see similar trends.


September is traditionally the worst month, but this year could be different, says Nigel Green, CEO and founder of deVere Group - an independent financial advisory, asset management and fintech firm.

The comments from Green come as August draws to a close, hailing the end of summer for those in the Northern Hemisphere, and as investors readjust their portfolios as we move to the most critical time of the year to lock in gains.

The best performance for Indian benchmarks was in September 2012, when Nifty50 rose about 8.45 per cent, whereas it zoomed close to 5 per cent in the next year. In 2019, the benchmark index advanced 4 per cent, whereas, in September last year, the benchmark rose almost 3 per cent.

The worst performance for September month came in 2018 when the index plunged 6.4 per cent. In 2016, 2017 and 2020, the index dropped in the range of 1-2 per cent during the given month.

On Thursday, September 1, the 30-share Sensex fell 770 points to end at 58,767. Its broader peer, Nifty50, declined 217 points to end at 17,543. Meanwhile, on Friday, it settled flat.

Ajit Mishra, VP- Research, Religare Broking, said that there is no fixed event in September and the domestic market is gearing up for the much-awaited festive season, leading to a mixed monthly performance.

For the US equities, it's a month of historically weak returns and is called 'The September Effect.' There is a statistical case for the effect depending on the period analyzed, but much of the theory remains anecdotal.

"But this year may be different," said Green. "Investors should ignore the noise about The September Effect and focus on fundamentals," he suggested.

However, analysts at home believe that markets will continue to remain highly volatile in the near term, thanks to the inflationary and rate hike worries.

If the ongoing monetary tightening succeeds in containing inflation without pushing the US economy into a recession, that would be a bullish scenario, said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

"On the other hand, if the Fed turns more aggressive in its monetary tightening and if the US economy is pushed into a severe recession in the process, globally markets will turn bearish," he added.

Experts suggest that investors should respond to these uncertain times with common sense investing. Stay invested and continue to invest systematically, they advised.

"In these uncertain times, there is safety in high-quality large-caps," Vijaykumar suggested. "We also know that mid and small-caps will outperform in the long run."