As Christmas has arrived, there is an anticipation of Santa Claus rally in the market. Amid volatility, positional investors and traders would like to encash this opportunity if the stock market shows upward momentum in the coming week. 

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The Santa Claus rally is basically a tendency of the stock market to surge over the last weeks of December and the New Year.  This rally may also be attributed to the flow of fresh funds from investors amid anticipation of good returns and putting into motion investment plans for the next financial year.  

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The domestic equity markets ended with minor losses on the last trading day of the week after ending positive in the last three trading sessions. This recovery came after the markets witnessed one of the sharpest falls of 2021 on Monday. As the markets have hinted at a sign of recovery with three positive closings, excluding Friday's one when domestic equity benchmarks Nifty50 and the S&P BSE Sensex ended with 0.40 and 0.33 per cent loss respectively, is Santa Claus rally on the card? Can investors use it as a window to buy stocks? Does the stock market go up during Christmas? Is Christmas a good time to buy stocks? Here is what market experts make of these frequently asked questions.  

1 Does the stock market go up during Christmas?

Santosh Meena, Head of Research, Swastika Investmart Ltd, said historically 20-year data shows Santa rally and 14 out of such 20 occasions, market did well by the year-end.

"Anecdotally, we saw a Santa rally in the market in the last 7-8 trading sessions of December month, however, volumes remain muted. Therefore, this rally can't be extrapolated in January month," said the market expert.

As per Gaurav Garg, Head of Research at CapitalVia Global Research, December is not a favorable month for the Indian markets. "In 9 out of 10 years, the benchmark indices ended the month within a range of -4% to +3 %. We see the same pattern this year. with the market trading in the same range for the month. The sole exception was the year 2020 when we saw market bouncing back owing to the pandemic as economies throughout the world attempted to normalize," he said.  

Manoj Dalmia, founder and director, Proficient equities private limited, illustrating it with the help of chart says that 10-year December month chart does not reflect any proper  trends in return. 

Proficient equities private limited founder, however, says chart does show that 6/10 times market gave positive returns in December Month.

If we see the past 11-year data of Nifty Index, it’s prevalent that Santa Claus Rally exists, says Ravi Singh, head of Research and vice president, share India.  "It is mainly due to the reason that as the global markets becomes illiquid after 15th of December due to the holidays and approaching year-end, the Indian market has liquidity. The investors are most active during these days in India, as few weeks still remain for the financial year end," said Ravi Singh.

The current market scenario is not very favourable for the investment due to various concerns in near term, he opines. "However, SBI, ICICI Bank, Maruti, Tata Motors, Wipro, Infosys, Sunpharma and Auropharma are looking attractive for mid-term investment," he added
 
2. Do stocks usually go up in December?

Santosh Meena

"If we look at the last 20 years' performance, then December is one of the best months with an average return of 3% in Nifty, while January remains a weak month with an average negative return of 1%.  It has been observed that those sectors or stocks which outperformed throughout the years tend to do well by the year-end."

Gaurav Garg

"Equities typically are range-bound in December, unless there are any significant global or domestic events that might influence the markets. However, one should not overlook the sector-specific movements in the stock market as a result of events, since most institutions and investors would move their money from one space to another." 
3. Is Christmas a good time to buy stocks?

Manoj Dalmia

We have taken Data of December current month to Jan Next Month (below in the chart). Assuming we buy in the Christmas time, we base our calculation comparing it to the previous month (Nov-Dec) returns compared with (Dec-Jan ).

Observation  
It is found that 5/10 times over a period of 10 years we got greater returns comparing it with (Nov-Dec) to (Dec-Jan).he probability is 50-50 of Christmas being a good time to buy.

Santosh Meena

"It is difficult to say whether Christmas is a good time to buy stocks or not. But as I said the year-end rally is not backed by volumes and it can't be extrapolated in January."
Gaurav Garg

"Markets generally move in ranges. We may not see a lot of momentum in the equities. It is a good time to buy undervalued stocks or stocks that can be bought at a discounted price. However, in the current year, after reaching an all-time high of 18,604 in October, the market corrected by more than 2000 points, reaching a low of 16410 in December. Those who missed the last rally may now add value picks to their portfolio."

Ravi Singhal
It is good to invest, but as corona cases are still rising.  One should be cautious and employ SIP mode of investment in sectors like hotel, travel, IT, auto, metal.

(Disclaimer: The views/suggestions/advises expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)