pril is the cruellest month, said TS Eliot in The Wasteland . He may just have missed the mark by a month, if data is anything to go by. The benchmark Sensex has a history of unpredictability with a slight bias towards negativity in March, the last month of the financial year.
In the 26 years since 1990, the Sensex has lost ground in 16 years and gained in the remaining 10. In the current year, the index had gained 7.20 per cent till Tuesday.
March is considered to be an important month from the market’s perspective since many retail and institutional investors, including corporate houses and family offices, factor in their tax burden and redeem their investments accordingly. Many investors book losses as well to reduce their tax liability.
Incidentally, the movement of the market in March is often used to describe the investor reaction to the Union Budget that is presented in February.
For instance, this year has seen an unexpected rise in the number of companies announcing a dividend after the government proposed a 10 per cent tax on dividends in excess of Rs 10 lakh. The rush in announcements is due to the fact that the new norms will be implemented from April 1.
“This year, for example, the change with respect to dividend tax will benefit a large number of individuals who had not expected such a bounty. It is also a myth that people wait to plan their finances in the last month. The only thing left could be the name of the scheme in which the investment is to be made,” says Arun Kejriwal, founder, Kris Research. Since 1990, the highest monthly loss in the last month of the financial year was witnessed in 1993 when the Sensex lost 18.07 per cent or 503 points. Double-digit losses were also registered in the years 1994, 2001 and the most recent in 2008, when the Sensex fell 11 per cent or 1,934 points.
“While there is no predictable and definite behaviour in the last month of the financial year, the Sensex movement can be partially attributed to unexpected changes in the budget and its consequences,” says Mr Kejriwal.
On the positive side, the highest monthly gain was witnessed in the year 1992 when the Sensex went up by 42 per cent or 1,267 points. In recent years, the Sensex gained over 9 per cent each in 2009 and 2011. In 1999, the Sensex gained 10.01 per cent. Interestingly, Foreign Institutional Investors (FIIs) have been net buyers of Indian shares in most of the years in March. As per data from the Securities and Exchange Board of India and the National Securities Depository Ltd, FIIs have been net sellers in March only on two occasions: once in 2007 and then in 2008. In 2014, FIIs pumped in Rs 20,077 crore in Indian equities in March, followed by Rs 12,078 crore the next year in the same month. In March 2010, FIIs were net buyers of Indian shares at Rs 19,928 crore.
The movement of the market in March is used to describe the investor reaction to the Union Budget
