Thank God it’s April: D-Street’s likely to stay green, as always

Data over the past 15 years show that April is the best month of the year, and the bounceback last Friday only confirms this trend. The trend is even stronger in smaller stocks.

Since 2006, the BSE Small Cap index has given positive returns in the month of April 14 out of 15 times. Neither the market crash after the subprime crisis in 2008, nor the Covid outbreak in 2020 discouraged traders in this month, and it is less likely that the ongoing Russia-Ukraine war will have much of an impact. The only exception was 2019. Uncertainty over the outcome of the most recent central elections that started in April 2019 and continued until mid-May forced investors to prefer larger companies. The small cap index dipped 2.7% in April of that year, but the Sensex gained.

For BSE midcap and the Sensex, the trend is similar, except that these indices have given positive returns 13 and 12 times, respectively, in the past 15 years.

One of the key reasons for such market behaviour is the restricted activity in March due to the end of the financial year. Most traders and investors rush in to buy the stocks at the beginning of the new financial year. The first day of the month, also the start to FY23, saw similar buying patterns. The BSE Small cap index closed 1.7% higher, while the BSE Midcap and the Sensex climbed 1.4% and 1.2%, respectively.

This trend is likely to sustain for the next few weeks, with a correction in oil prices and a reversal in the fall of the rupee seen to favour local equities.