13/04/26, Month on Month performance

 The headline index Nifty 50 has fallen for the past four months, tumbling 15% given the ongoing geopolitical crisis, exodus of foreign investors, and soaring crude prices. However, the four consecutive months of a fall might be a solid contra-indicator, implying that the index's fortunes in April may fare better.

According to DSP's latest Netra report, the Nifty 50 has only recorded seven instances of decline lasting four months or longer. The longest was an eight month run from September 1994 to April 1995.

The brokerage's report also added that the longer the fall, the smarter the rebound usually is. "Across the seven completed cases, the average return was 12.2% over 3 months, 22.4% over 6 months, and 40.7% over 1 year, while the median return was 13.9%, 17.0%, and 20.8% respectively," said DSP.

The brokerage also noted that the gap between average and median, especially over six months and one year, suggests that a few very strong rebounds lifted the average, while the median gives a cleaner sense of the more typical outcome. "In short, these four month losing streaks have been rare, but once they ended, forward returns were usually favourable," said the Netra note.

Why have markets fallen for four consecutive months?

Not just India, but there's been a selloff in global equity markets as a result of the ongoing West Asia conflict. Further, a weakening rupee, and worries about what elevated crude prices could do to India's growth and corporate earnings, all of which has kept FPIs on edge, leading to record selling in March. India has delivered poor earnings growth and returns relative to other markets, both developed and emerging, over the past eighteen months.

Additionally, the closure of the Strait of Hormuz has led to a spike in crude prices, sending the commodity soaring past the $100/bbl mark. This has raised concerns on India's oil bill and fiscal standing, as India is a net energy importer.

 However, in April, conversations surrounding a ceasefire, coupled with value-buying, have lifted markets. Even as the Nifty 50 and broader markets are seeing selling pressure today, as a result of stuttering peace talks between US and Iran, the headline index is still up over six percent for the month so far.

Even as markets are higher in April, the ongoing uncertainty and volatility on the geopolitical front could temper gains, so investors should tread carefully.

Report by Zora Springwala of Money Control