The average return for the Nifty 50 in October has been 2.6 per cent in the last 10 years. The highest monthly return for the index in October was 9.8 per cent in 2013, while the lowest was a negative 5 per cent in 2018.
The probability of a positive market close in October is also the highest among all months, at 70 per cent, when compared to other months, where it is in the range of 45-64 per cent.
The returns in October seem to get a shot in the arm from improved consumer sentiment at the beginning of the festive season, which coincides with the peak sales for Indian consumer goods companies in the third quarter, which constitutes 30-35 per cent of total volumes for the fiscal year typically.
The impact of the festive season is seen most in automobile stocks, where festival sales volume has a direct bearing on share prices.
The Nifty auto index has delivered an average return of 4.3 per cent in October and has closed in positive territory for 80 per cent of the observation period. In 2019, the Nifty auto index gained 12.8 per cent, the highest growth in the last decade. Typically, the festival sales volumes for auto companies account for 1.5-2 times their monthly sales volumes.
The average return for the Nifty bank index in October matches with the Nifty auto index, although the number of outperformance years are fewer.
The FMCG and IT indices, seen as defensive bets, had the lowest returns in October with average return of 1.0 per cent and 0.7 per cent, respectively.
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