Sunday, December 2, 2012

How has December been historically?

The markets have gained 4.6 pc for the month of November. There seems to be a mild sense of euphoria in the markets. Let us try and see how markets have performed in the month of December and our strategy to handle the same.

1. First the good news. Historically the markets have tended to remain positive in the month of December. They have been negative only 3 times in the 11 years under study.

2. Next the picture changes when you take the November and December months into joint consideration. Out of the 8 years when November has been positive, December has been marginally negative twice and 5 times the gains in December have been less than the gains in November. This year the gains were 4.6 pc in November. This implies December could see less than 4 pc gain. This would give us the price target of 6114 at the maximum.

3. Only once in 2003, the December performance has been about 4 times the November performance. If that is repeated we have a price target of 6996 which can be ruled out.

4. The December month lowest price has always been below the November closing price. Also, in most instances it has been at least 3 pc lower then November close price. This implies we would see the 5702 being tested once in this month.

The conclusion from the above study of the month of December is that generally December is positive. The market does give 1 buying opportunity with a small dip. The bullishness in the month of December is less than the bullishness in the month of November. This would also imply that the midcaps would rally more than the large cap stocks.

Now, is the time to maintain caution and keep regularly booking profits at every 100 points of Nifty. My target for the moth of Dec-Jan is around 6200-6300 for the markets to eventually peak out and then begin a negative 2013.

The newsflow has been positive with the Parliament getting settled, Greece issue being sorted. The fiscal cliff also will be eventually sorted out just before the deadline.

Now, it is also a good time to lock in profits from the Equities ito Gilt funds which should give returns of about 15 pc over the next 1 year.

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