We know how diverse a country India is, and the number of festivals indians have. It might sound weird, but these festivals have a strong impact on the stock market.
OBSERVATIONS
Let us start with studying some patterns that are observed during festivals in India.
During the festival season in India, the demand for cash flow increases.
Irrespective of the price, people invest a lot in gold, silver during Dhanteras and many other festivities. Gold investment is considered auspicious.
Festive dates are considered auspicious for purchasing a new car, getting married, buying a new house etc. leading to liquidation of assets just prior to the festive times.
Mahurat trading is performed on stock exchanges in India for an hour on the occasion of Diwali. It is believed that Mahurat trading brings in wealth and prosperity.
There is a decline in stock purchase in the pre-festive period.
Stock market is also heavily influenced by FIIs, FOREX market conditions, interest rates, inflation, corporate decisions etc.
EFFECTS
For liquidating assets, stock investors sell their shares and it leads to fluctuations in the stock market. Selling stocks leads to increase in supply in the market.
Gold investment during dhanteras always pushes the price up.
Marriage, new car purchase, new property purchase etc. leads to heavy liquidation of assets.
Many companies showcase abnormally high returns on the day of festival and the day after. The results depend on the festival and the volume of investors that are driven by it. However the results are not that significant to project a trend.
Conclusion
Impact of festivals on stock market is not significant. Even Mahurat trading during Diwali does not impact the market much. The primary reason leading to this outcome is the impact of existing market abnormalities which fail to get impacted by the festive demands.
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