In October, Sensex down 11 times in 18 years

COIMBATORE: After a spectacular September, which saw Sensex clocking more than 9% returns, will the markets usher in a crackling festival bonanza? While there has been much talk about "valuations getting stretched" and a "correction", October hasn't really been an exciting month for Sensex in the past.

The Sensex has given negative returns in nearly two out of three occasions since 1991 when the economy opened up. The benchmark index has declined in 11 out of 18 years in October, data with BSE and domestic brokerage firm Anand Rathi financial services shows.

"October would be (a) volatile (month). But even if there is a correction it will not be big," reckons Ajay Parmar, head, research, Emkay Global financial services. "Markets have fallen most of the times either before or after Diwali in the past 15 years," says D D Sharma, senior vice-president , research, Anand Rathi.

The onset of the festival season and the announcement of corporate results act as a trigger for booking profits, he explains. "Barring some pockets of undervaluations, most of the large cap segment is fully valued discounting (2010-11) earnings expectations." Investors get into the exit mode when the results start trickling in and make a re-entry once the earnings get fully reflected ,” say market observers.

Though observers expect the quarter-ending September to be strong as advance tax payments have been buoyant, some believe earnings might lose steam after the festival season gets over.