What will market do after the Holi holiday of Thursday? The odds of it ending positive is very as per our analysis of over 89 exchange holidays since 2006
Markets have been declining for the past few days. What will it do on Friday after a break of a day on account of Holi? For this we turned towards what the market did after a holiday. We investigated exchange holidays, which fell during weekdays, by looking at data for the last six years, from 2006. As many as 89 data points were collected and analysed. We looked at the index closing the day before the exchange holiday and the returns after the exchange holiday. We came up with the following:
Over 89 exchange holidays were recorded from 2006; we found out that the Sensex ended positively 58 times out of 89 times; in other words, the Sensex was positive 65% of the time the day after the holiday. However, over the last 25 such occurrences, we found out that the markets ended up with a slightly higher probability of 68% (17 times out of 25), while the last 15 occurrences showed an even higher probability at 73% (11 times out of 15). Based on a small sample of data, this is quite significant.
We also analysed each year in isolation and came up with the following chart..jpg)
You will notice that every year has seen the probability of the markets opening on the upside more than 50% of the time, with the worst year being 2008 (50%). Incidentally, the maximum exchange holidays (18) was recorded in 2009 which also had the highest probability at 78%. Last year (2011), the markets closed up 10 times out of 15 while the year before last (2010) it closed up seven times out of 11.
Will the Festival of Colours bring cheers to the market on Friday? Since 2006, data indicates that the probabilities are better than the coin toss. In 2012, so far we’ve had two exchange holidays (out of the total of 15) and in both the cases, the markets reacted positively. The last four occurrences of Holi that fell on weekdays (the remaining two instances fell on a weekend and thus were excluded from our study), the markets responded positively on all the instances. The markets will hope that the festival will spray them with the colour they need—green.
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The Indian markets follow no logic or 'fundas', Festivals of Colours or Lights notwithstanding. They go up and down for no valid reason!
KingFisher Airlines with a series of very serious qualifications by its auditors or DLF with adverse analysis from international analyst show no signs of tanking.
Who says the markets have "matured"? - No way in my professional opinion. Trying proving me wrong.