Markets contradict June seasonality factor

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New Delhi: Indian equities have started the month of June on a strong note with the Nifty rising over 5 percent during the first week itself and the Nifty Bank gaining over 7 percent. The Nifty Small & Midcap index managed to outperform the Nifty since the start of the month. Sector indices – Nifty PSU Bank, Media and Realty have surged more than 10 percent during the first week of June. After an impressive comeback in April, Nifty consolidated in May to close at 9,580 helped by gains in the last few days of the month which continued at the start of June as well said Siddhartha Khemka, Head-Retail Research at Motilal Oswal Financial Services Limited.

However, all of this contradicts the June seasonality pattern followed by the markets during the last 5 years. The Nifty & Nifty Bank have declined 4 out of last 5 times in the month of June though not by much. On an average the decline in Nifty & Nifty Bank has been 0.3 percent and 1 percent respectively during June in the last 5 years. Markets have been under pressure in June going by the trend, Khemka added.

He believes markets have rallied sharply as investors have ignored near term growth concerns and cheered the gradual easing of the lockdown and good monsoon prediction. The rally in equities has been global in nature with the Nasdaq hitting life time high levels and other major indices not too far behind. He concluded by saying given the sharp rally witnessed over last few days, we may see the Indian markets consolidating or taking a breather for some time before starting the next leg of rally. 

Sector indices that have declined 4 out last 5 times in June are Nifty PSU Bank, Nifty IT & Nifty Auto. They declined 2.5 percent, 2 percent and 1.8 percent respectively on an average in June during the last 5 years. 

June seasonality has favoured stocks like Bajaj Finance (up 11 percent on average), Dabur (up 3.6 percent on average) and HDFC (up 2.7 percent on average). 

June seasonality has not favoured stocks like Tech Mahindra (down 7.5 percent on average), UPL (down 6.4 percent on average), Tata Motors (down 6 percent on average), Berger Paints (down 4.5 percent on average) and Tata Chemicals (down 2.6 percent on average). 

Nifty declined 4 out of 5 times in June during the last 5 years.