Stock market trend: Will Nifty 50 break its five-month losing streak in March? Here’s what seasonality shows

The Indian stock market crashed on Friday, with both benchmark indices — Sensex and Nifty 50 — falling over 1% each, marking a weak start to the March F&O series. The sell-off was broad-based, mirroring weakness in global markets.

The Sensex plunged over 1,000 points, while the Nifty 50 declined more than 300 points, slipping below the 22,250 mark. The broader market indices also faced significant losses, with the Nifty Smallcap 100 and Nifty Midcap 100 tumbling 3% each on February 28.

With a 5.5% loss in February, the Nifty 50 is on track to post a five-month losing streak — a rare occurrence last seen in 1996.

As investors assess market conditions, the key question remains: Will the sell-off extend into March? Historical trends offer insights into Nifty’s performance during this period.

Nifty 50 Shows Strong March Seasonality

Nifty 50 index has demonstrated a positive price seasonality in March, closing in the green on seven occasions over the past decade, according to JM Financial’s latest analysis.

The average and median returns for the benchmark index during this period stand at 0.3% and 1.3%, respectively. However, when excluding the steep 23% decline in 2020, triggered by the onset of the Covid-19 pandemic, the average return improves significantly to 2.3%.

In contrast, the Nifty Midcap index has shown weaker seasonality in March, closing in positive territory only five times in the last 10 years. The index’s average return is -0.6%, while the median return is 0.8%, JM Financial report showed. However, excluding the sharp 30% drop in 2020, the average return rises to 2.7%. The Mid-cap index has underperformed the Nifty 50 on five occasions, with an overall average inline performance.

Sectoral Trends: Auto Sector Underperforms

Historically, sectoral performance has varied based on seasonality. In March, the Nifty Auto index has struggled, closing in the red on seven occasions. The sector’s average return stands at -2.6%, and the median return is -2.7%. However, excluding the sharp 32% decline in 2020, the average return improves to 0.6%, the JM Financial report showed.

On a relative basis, the Nifty MNC index has been the most consistent outperformer, beating the Nifty 50 on seven occasions with an average and median outperformance of 0.2% and 0.3%, respectively. On the other hand, the Nifty CPSE index has lagged behind, underperforming the Nifty on seven occasions with an average underperformance of 0.8% and a median underperformance of 1.2%.

Stock-Specific Seasonality

Among F&O stocks, several names have exhibited strong seasonality trends in March. Stocks that have closed in the green with a probability of over 70% and an average positive return of more than 4% include Navin Fluorine International, IPCA Laboratories, KEI Industries, Nestle India, SRF, Page Industries, Interglobe Aviation, and APL Apollo Tubes.

Conversely, stocks that have consistently struggled in March, closing in the red with a probability of over 70% and an average negative return exceeding 4%, include HFCL, RBL Bank, Housing Urban Development Corporation (HUDCO), Vodafone Idea, Apollo Hospitals Enterprise, Coal India, Mahindra & Mahindra (M&M), and Bharat Forge.

With March historically being a mixed bag for equities, investors may factor in these seasonality trends while making portfolio adjustments. However, given external macroeconomic conditions and market volatility, experts caution against relying solely on historical patterns for investment decisions.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.