Irrational market behaviour ascribed to sun-outage from Sep 24-Oct 8

PLANET POSITION

It's sun-ny side down

WHEN markets defy logic and become a pure-play of sentiment, umpteen theories justify the irrational behaviour. This time around, the theory that is doing the rounds relates to the sunoutage that started on September 24 and ended on October 8. According to the proponents of this theory, over the last nine years, since Indian stock exchanges started facing sunoutage semi-annually, a peculiar trend is exhibited by the market- Down-in-March and Up-in-Dussehra. During March sun-outage period, the market slides and then during the September-October period, it rises.
    But the current year (September-October period) has been an exception, and so was the year 2002 which witnessed drought in the country. Incidentally, 2002-03 also marked a significant bottom for the next five years' bull market. So, does the repeat of September-October 2002 pattern in Sensex in the current year convey a 'bigbottom' formation? What stands out in the current year's September-October sun-outage period is the record fall of 17%.
    "The position of the planets has a lot to do with the way markets behave," said Dharmesh Joshi of Ganeshaspeaks.com. "This time during the sun outage, Jupiter was in a better position than Saturn which is adverse for the markets. We expect a uptrend in the stock indices till November 3rd," he added.
    The aforementioned trend was broken on two occasions—the first time the rising trend during September-October was broken was in the year 2002, which coincided with what the India Meteorological Department officially acknowledged as "the first-ever all-India drought year''. And the second time is now when the 30-share Sensex has fallen from a high of 13692.52 points to 11328.36 while touching the intraday low of 10740.76 on the last day of sun-outage. Again, the year 2006 and 2007 were exceptions to the 'down-in-March' rule. Those peddling this line say that the uptrend noticed during these two periods was mainly on account of the extraordinary corporate performance and massive foreign capital inflows.
    If the theory is to be proved right- it will require infusion of funds by the regulator, say market participants ."We feel that we are quite near to the bottom and fundamentally there is nothing wrong with the Indian economy, said KR Choksy of KR Choksy Shares and Securities. "The steep fall we are seeing is because of lack of confidence in the system. Once enough liquidity comes in the system, we expect an improvement. "
    Recently, US researchers, Jennifer Whitson and Adam Galinsky concluded their latest study saying that lack of control can lead rational people to see patterns even where no true pattern exists. They said their findings help explain why stock analysts sometimes see ominous trends in perfectly innocuous data.
    And when it comes to the think-tanks on Dalal Street, superstition and analogies take a completely new level. Whether this empirical trend would hold true this time around also remains to be seen. But one thing we all can vouch for with Whitson and Galinsky is that lacking control leads to a visceral need for order- even imaginary order!
    payaswiniupadhyay@timesgroup.com