Recently, the BSE Sensex took a big hit, dropping nearly 4% during the Maha Kumbh period. But is it time for it to rise again? Historical data shows that five out of six times since 2004, the Sensex ended up going up over the next six months, giving an average return of 8%. Apurva Sheth from SAMCO Securities looked into these past Kumbh events to see how the Sensex performed and why he thinks it will go higher this time.
Kumbh Performance Overview:
– 2004 Ujjain Kumbh (April 5 – May 4): The Sensex fell by 3.27% but bounced back with 1.01% gains in the next six months.
– 2010 Haridwar Kumbh (Jan 14 – April 28): A small drop of 1.16% was followed by a strong 16.82% return.
– 2013 Prayagraj Kumbh (Jan 14 – March 11): The index dropped 1.31% but recovered to give 1.79% returns.
– 2015 Nashik Kumbh (July 14 – Sep 28): The worst fall was 8.29%, and it did not recover, with returns down by 2.54%.
– 2016 Ujjain Kumbh (April 22 – May 23): The Sensex dipped by 2.35% but grew by 2.12% afterward.
– 2021 Haridwar Kumbh (April 1 – April 19): It fell sharply by 4.16% but had an amazing recovery of 28.81% in the next six months.
The most recent Kumbh was the Prayagraj Kumbh, which lasted 48 days from January 9 to March 26. The Sensex fell from 77,620.21 to 74,602.12 during this time. On average, it dropped by 3.49% during the Kumbh events, but the average recovery is 8%.
In the six trading days after the Kumbh ended, the Sensex fell another 0.56%, which equals approximately 400 points down. The six-month recovery period will end on August 28, 2023.
So, why does Sheth believe the Sensex will recover? Here are two big reasons:
1. Valuations are Attractive: Historical data shows that when the market drops, it often bounces back as valuations get more appealing. Currently, the Nifty’s price-to-earnings (PE) ratio is at 19.6, close to lower levels that could signal a good buying opportunity. Past trends suggest that investments made when valuations are low typically yield about 17.85% returns in a year.
2. A Bounce-Back is Likely: When the index closes down for eight or more days in a row, history shows that it usually rebounds. Since 2002, this has happened nine times, with the index rising in six of those cases by an average of 2.68% a month later.
Sheth encourages investors to remember the words of Warren Buffett: “Be greedy when everyone else is fearful.”
(Disclaimer: These views are those of the expert and do not represent the views of Thellv.news)
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