An examination of seasonality in Indian stock markets with reference to NSE

Abstract

The seasonality of stock market in India has been examined. CNX Nifty was considered as the representative of stock market in India and it was tested whether seasonality is present in Nifty and Nifty Junior returns using daily and monthly data sets. The study found that monthly seasonality is present in Nifty and Nifty Junior returns. An analysis of the mean performances of CNX Nifty and Nifty Junior showed that the performance of Nifty was netter compared to Nifty Junior. It was also found that stock returns of Nifty Junior were more volatile compared to those of CNX Nifty thus proving that it is better and safe to trade in CNX Nifty compared to Nifty Junior. The stationarity of stock returns of CNX Nifty and Nifty Junior were analysed and it was recorded that the stock returns of both the indices were stationary in their level form. Through the analysis of stock market seasonality using daily data, it was found that no seasonality was present and there was no days of the week or weekend effect in Nifty and Nifty Junior returns as none of the coefficients were significant at 5 percent significance level. In Case of monthly analysis of returns, the study found that the January effect existed in Nifty returns as the coefficient was found to be significant at 5 percent level of significance. But there was no seasonality observed in Nifty Junior returns as none of the coefficients were significant at 5 percent level of significance.