## Impact of Indian festival on the Stock Market

I hope you all are doing well and making lots of money in stock market. As the festival of color is on the way and traders started asking me about its impact on the stock market, so today i am writing this article in guidance of Epic Research R&D team, to help you decode the mystery of the stock market and help you understand the effect of various Indian Festival on the stock market.

The Main Objective :

Selection of the Indices :

• We will select S&P CNX Nifty Indices because of their most liquid stocks in the portfolio.
• National Stock Exchange (Largest Volume and Market Capitalization).
• Oldest stock index (BSE Index S&P BSE SENSEX).

Time for Mathematical Calculation :

** Daily Return series were generated from closing prices.

 For two return series areas :

Rt ={(P1 – P0)/P0}*100

Where P1 = daily closing price at time t, P0 = daily closing price at time t-1 and Rt = daily return at time t

Separate Return series for each festival were generated from this for all festivals.

Pre and Post Festival daily returns are arranged for 10 years respectively for 7, 15 and 30 days which also include daily returns of festival day if the market is not closed that day. Mainly two statistical tools were used 1.) Paired Sample t test : for comparison of mean return before and after festival & 2.) Descriptive Statistics : which helps to study basic characteristics of series.

Study Hypothesis :

H0: Before and after the festival there is no significant effect of festival on mean returns of stock indices.

Closing prices of Bombay Stock Exchange Index S&P BSE SENSEX and NSE Index S&P CNX Nifty were taken from respective official portal of the stock exchanges.

Data for the study :

Festivals Selected for the study are :

1.) Makar-Sakranti 2.) Holi 3.) Rakha Bandhan 4.) Navaratri 5.) Vasant-Panchami 6.) Rama Navami

7.) Janmasthami 8.) Dushera 9.) Shiva-Ratri 10.) Akshay –Tritiya 11.) Ganesh-Chaturthi 12.) Diwali

*Non-Probabilistic convenience sampling is applied to collect data.

Analysis of data and its Interpretation :

Characteristics of the series is analysed by descriptive statistics. Peakness of the data is Kurtosis. Non-symmetry level is indicated by Skewness measure and the standard and mean deviation are first two steps of analysis.

It is being observed from the study that maximum and minimum returns for daily returns were 12% and -16% respectively and for both the indices the value of kurtosis was around 8 and 9. Whereas for both the indices, average daily returns were 0.07% and the standard deviation was around 1.65%. It implies that daily return fluctuate around 2%.

**H0 = Before and after 7 days of the festival there is no significant difference in the mean return of the sensex was observed.

Interpretation :

To measure the influence of the festival on returns of the Sensex an Nifty, paired sample t test on the 10 year data was carried out.

For Vasant panchami, Rama Navami, Makar Sakranti, Shiva Ratri, Raksha Bandhan, Navratri, Akshay tritiya and Ganesh chaturthi the p-value is more than 0.1 which implies that the above mentioned festivals do not have any significant impact in the mean returns of the stock.

But if we look into the table the festivals which had significant impact on the mean returns of the stock were Diwali, Janmashthami and Holi with p-value less than 0.1 . The mean return increases by nearly 0.5% to 1% in most of the festivals as observed from the table.

After analyzing the returns for 7 days, Now we will analyze returns of Sensex and Nifty for 15 and 30 days to check how long the impact of festivals was in the stock narket.

**H0 = Before and after 15 and 30 days of festival, there is no significant difference in the mean return of sensex.

Result of t test for 15 and 30 days analysis for Janmasthami, Diwali and Holi is given below in the table.

It can be observed from the above table for the selected index (for 15 and 30 days analysis), p-value of only Holi is smaller than specified alpha value of 0.1 for the selected index. Thus it can be concluded that among Janmashthami, Diwali and Holi, impact of only Holi lasted the longest and the mean return increases by 0.5%.

Conclusion :

• Excess return during the post period of Janmashthami, Diwali and Holi.
• During these festivals, market is informally efficient so customer can avail maximum opportunity in order to obtain good returns.
• Consumer selling is high due to festive season and high cash in hand.
• In Janmashthami, there is a ritual of betting thus many traders invest their money in the stock market which may increase the stock prices in this festival.
• High returns can be expected after Holi because annual budget is presented in the parliament during February to April.

Hope this will help you to understand how important role festival play while investing your money in the stock market. If you have any suggestions you can feel free to comment in my comment box.

Epic Research Team Wish you Good Luck and Prosperous future.