EQUITY MARKETS and “THE SEPTEMBER EFFECT”

Dear Investors,

August was a good month for the markets.

The Indian markets hit a new high, driven by global trends and strong local buying, achieving a record twelve-day winning streak in August, surpassing the previous record of 11 days set in 2007.

The rally was led by the broad-based Nifty-50 for the fourth week in a row. The Bank Nifty brought up the rear.

This broad market rally pushed both benchmark and smaller indices to new peaks, even though foreign investors (FIIs) sold about Rs 19,000 crore in the cash market during the last week of the month.

Despite concerns of a slowdown in capital expenditure due to the elections, gross fixed capital formation grew by 7.5% in Q1 FY25, up from 6.5% in the previous quarter, indicating a likely increase in private capex.

GDP in Q1 was affected by a drag from net exports of goods and services and reduced government consumption expenditure.

While global markets had mixed results in August, India’s BSE Sensex reached a new high of 82,637.03, gaining 0.76%, and the Nifty50 hit 25,268.35, closing 1.14% higher than in July 2024.

A surprise bonus issue by Reliance Industries gave an extra boost to the Indian markets.

However, with the next month on the calendar, we know that Equity markets in September are often viewed with concern, as it has historically been one of the worst months for stocks.

This historical recurrence is also known as The September Effect.

The September Effect is a market anomaly where stock returns tend to be weaker during September. It’s seen as an anomaly because it contradicts the idea of market efficiency. Some believe this weakness is due to seasonal behavior, with investors adjusting their portfolios and cashing in at the end of summer. While there is some statistical evidence supporting the September Effect, its occurrence depends on the specific time period being analyzed.

 

Nifty 50 Returns – Last 10 years
Year	Sept Returns
2023	2.00%
2022	-3.75%
2021	2.77%
2020	-1.23%
2019	4.09%
2018	-6.42%
2017	-1.30%
2016	-1.99%
2015	-0.28%
2014	0.13%
2013	4.82%

Since 1950, the S&P 500 has averaged a 0.7% loss in September. In the past four years, the index saw sharp declines of 4.9%, 9.3%, 4.8%, and 3.9%. This year has followed the trend, with markets starting on a negative note. In the first week of September, US markets dropped, pulling global markets down as well.

Indian markets also faced selling pressure, with benchmark indices closing 1.5% lower for the week ending 6th Sept-24, despite hitting new all-time highs earlier. The broader market also declined, with a sharp fall across all sectors on Friday, closing in the red.

However, Indian markets remained more resilient, recording the smallest drop globally for the week.

Despite Friday’s [6^th Sept’s] steep decline, Indian markets outperformed globally, while U.S. markets recorded their worst weekly performance in 18 months.

Now we’ve had an exciting rally over the past 18 months, with wealth accumulation seeming almost effortless. But can we expect the same momentum over the next six months—or even 18?

Markets have a habit of stretching valuations, and we are now at unprecedented levels. A correction, or a return to normal, seems like a matter of time.

The macroeconomic environment remains strong, but the equity markets have simply outpaced current fundamentals, reflecting the long-term potential and investor confidence in continued growth.

MARKET OUTLOOK:

While the phase of speculative investment based on narratives is firmly behind us, the market still has potential to rise, even with short-term corrections or volatility. This makes it a “buy on dips” market.

However, the long winning streak calls for caution, as pullbacks are a natural part of a bull run. The 25,000 level has become a strong support.

We always strive to make investors optimistic, as this is the starting point of wealth creation through equity investments.

We also declutter investors’ concerns through objective evaluation of markets and assure you of the best investment services, backed by in-depth knowledge, driven by content, and analytics.

At PMS AIF WORLD, we understand the gravity of investment decisions, so we offer a well-informed experience and bespoke Wealth Management Services.

We are a New Age Investment Services Company, committed to delivering an analytics-driven, high-quality investing experience.

Our mission is to foster Wealth Creation and Prosperity for our clients.

We are driven by a dedication to excellence and meticulously offer the best Alpha-focused products.

Our suite of investment products spans a diverse range from listed to unlisted, encompassing pre-IPO, Private Equity, and Venture Capital funds.

With us, you invest in the best.

JOIN US ON A JOURNEY WHERE TRADITION MEETS INNOVATION, AND WHERE THE FOCUS IS ON ALPHA.

Our endeavors are to determine the Quality, Risk, and Consistency attributes (QRC). We present all data and analytics with an endeavor and the aim of informed investment decisions. If you are looking to invest and are not able to decide between PMS and Mutual Funds, or between PMS and Alternative investment funds, Book A Video Call with our experts.