Festive seasons in India have multi-layered significance for the people. On the one hand, we have the festivities and traditions that honour years of culture passed down through the generations. On the other hand, we have a more modern approach — where the average Indian trader attempts to profit from peak festive market volatility or diversify their portfolio with new long-term investments.
If you want to make the most of share market price movements this Navratri, Samco Securities may be just the friend you need. With unlimited free access to a wide range of technical indicators in the Samco trading app, you can monitor the markets on the go and never miss out on potentially big Navratri trading opportunities.
However, before you take the leap and create your festive trading plan, you must attempt to understand how Navratri may affect market performance. Let’s see what historical data can tell us about this.
Navratri Trading in the Share Market: What to Expect?
To draw up a reasonable Navratri trading plan, you need to have a clear idea of what to expect from the share market. Here’s what the previous years have shown us.
No Guarantee of Market Direction
With no other influences impacting the share prices, you may expect the market to be bullish in the lead-up to the festive season. While this may be a reasonable expectation, it has not always been the case. Only last year, in the weeks leading up to Navratri, the market witnessed a significant drop, with the Sensex falling by 316 points and the Nifty dropping below 19,550.
Similarly, many traders may expect the stock prices to also rise as the festive season closes, owing to last-minute stock investments. However, this is also not guaranteed. 2023 has a lesson for us here too, with the Sensex falling by 826 points and the Nifty sliding below 19,300 at the close of the Navratri trading season.
However, this may not always be the case. For instance, in the year before last, both the benchmark indices rose at the end of the festive trading season — with the Nifty topping 17,250 and the Sensex up by 1,200+ points. There’s a valuable lesson here, that the market direction cannot be predicted based on historical data alone. So, ensure that you study the technical indicators this year to understand how the share market may move as the Navratri trading season approaches.
The Impact of Sectoral Allocation
If you want to study the impact of the Navratri festival on stock prices, analysing sectoral performance is as important as evaluating broad market performance. Often, the benchmark indices may be dragged down or pulled upward by one or a few sectors alone. So, you also need to be aware of the prospects for different sectors and factor that into your trading plan.
For instance, the big pre-Navratri dip in the Nifty and Sensex indices in 2023 was primarily because of the bearish auto sector. Auto stocks dipped by 1.20% and dragged the benchmark indices down along with them. Eicher Motors, in particular, fell by around 2.68%.
The converse is also possible, where one or a few sectors move upward and take the indices along on a bullish spike. Typically, travel stocks, jewellery stocks and FMCG shares may rise during this period. For instance, towards the end of the Dussehra trading season in 2022, the PC Jeweller share price hit a 52-week high, driven primarily by the expectations of strong forthcoming demand.
This goes to show that studying sectoral trends is crucial during the festive trading season because it can help you assess potential market and index movements.
Volatility Markers
General logic may encourage you to assume that during the start and the end of the festive season of Navratri, the market may see increased volatility and trading volume. However, this has not always been the case. In fact, the markets recorded low volatility several times during the festive season in the past few years.
In 2023, the India VIX dipped below 10 as Navratri came to a close, indicating that traders expected low volatility over the next 30 days. In 2021, the VIX slid by 6% during the week leading up to Navratri.
That said, the opposite may also happen, with volatility spiking during this festive trading season. This may be triggered due to any potential national or global developments. So, watch out for market trends and check the volatility indicators to understand how much stock prices may move.
Increased Market Activity
The Navratri season may also be a time for increased primary market activity, with new shares and mutual funds due for issue. This is because companies and mutual fund houses may want to capitalise on the positive market sentiment typically associated with festive seasons in India. Last year, for instance, the primary market recorded 3 new IPOs and one new listing in the same festive week in October. In the year before that, around 10 new fund offers (NFOs) were announced and launched during Navratri 2022. This year too, around 7 companies are due to be listed in the first week of October.
That said, past spikes in primary market activity do not mean that they will repeat each year. So, ensure that you track the news and remain aware of any new listings scheduled for the festive season. This way, you can make the most of such primary market activity.
Impact of Q2 Results
Navratri typically falls in the last week of September or the first half of October each year. This is also the period when Q2 ends and companies start releasing their quarterly financial results. So, despite festival-driven optimism, poor Q2 results may lead to tepid market performance, especially if blue chip companies report less-than-stellar numbers.
The opposite is also possible, where exceptional quarterly results may lead to record highs and generally bullish market performance. This just goes to show that you must not merely look at the Navratri sentiment alone in your trading plan. Also, factor in the impact of quarterly results and trade or invest with caution, as needed.
A Byte-Sized Guide to Navratri Trading
Here are a few handy tips to help you make the most of the share market movements in the upcoming trading season.
Monitor Sector-Specific Trends
Keep an eye on sectors like auto, jewellery and FMCG. These industries often see increased activity during Navratri that could potentially impact their stock performance.
Watch for New IPOs
Stay informed about new listings scheduled during the Navratri period. Companies often time their IPOs to coincide with festive seasons to capitalise on bullish market sentiment.
Factor in Q2 Results
Remember that Navratri coincides with Q2 result announcements. These financial reports can significantly influence market trends and may override festive optimism.
Use Volatility Indicators
Track the India VIX to gauge expected market volatility. Low VIX doesn't always mean stable prices, so use it in conjunction with other indicators.
Don't Assume Bullish Trends
Avoid the common misconception that festivals always bring bullish markets. Historical data shows mixed trends, so base decisions on current market analysis.
Leverage Technical Analysis
Utilise technical indicators available on platforms like the Samco trading app to make informed decisions. Don't rely solely on historical festive season patterns.
Be Cautious of Overvalued Stocks
Festive hype might inflate certain stock prices. So, be wary of overvalued stocks and conduct a thorough fundamental analysis before you invest for the long term.
Conclusion
The bottom line is that Navratri trading, like trading at any other time, is not driven by any fixed rules. Just as any other trading session requires adequate due diligence, so does festive trading. You need to perform technical analysis or fundamental analysis — depending on whether you are trading or investing. Then, create a trading plan based on your estimates of potential market performance.
You can also trade in the derivatives segment if you expect high market volatility. Samco Securities can help you with this, thanks to an industry-first options strategy builder, Options B.R.O, which makes it a breeze to find the optimal trading strategy for any given market outlook.
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