Does Sensex Zoom After Kumbh Mela? Report Shows ‘Strange’ Historic Data – See Details

Several stocks hitting new 52-week lows reflect fear and panic selling in the market. In the past, Such extreme situations have often marked the final stages of a market correction, followed by a bounce back as selling pressure fades. 

Samco Securities, in its latest report, “Tariff Wars Priced In: Time to BUY BIG”, analyzed the impact of the Mahakumbh period on the stock market. The report stated that nearly half of India has taken a dip in the holy waters of the Mahakumbh. 

This study shows that the index is likely to trade on a negative note during Kumbha. The Sensex traded as per expectations and took a dip along with smallcaps and midcaps.

However, history suggests that six months after the Kumbh Mela ends, the Sensex tends to deliver an average forward return of 8%. This pattern has been observed in previous cycles, making a potential market recovery more likely in the coming months.

Historical data suggests that whenever the index trades around such valuation levels, the average 1 year forward returns have been 17.85%. Lower valuations not only provide a cushion against further downside but also attract institutional flows once risk appetite improves.

The report highlights that while the Sensex is only 15% below its highs, a staggering 87% of NSE-listed stocks are trading below their 40-week Exponential Moving Average (EMA). This is a more severe correction than in June 2022, when 82% of stocks were trading below their 200 EMA. Samco noted that such low readings usually signal that the majority of the selling pressure is behind us. 

According to Samco, the number of stocks making net new 52-week lows has dropped to -927, which is close to the -1006 level seen during the COVID-19 market crash. 
“Such extreme situations have often marked the final stages of a market correction, followed by a bounce back as selling pressure fades”, as per the report.

Valuation metrics further strengthen the case for a recovery. Samco’s analysis shows that Nifty’s Price-to-Earnings (PE) ratio is currently at 19.6x, a level that has historically coincided with strong market rebounds.

The report states that lower valuations not only offer a cushion against further downside but also tend to attract institutional investors once market sentiment improves.
“Whenever the index trades around such valuation levels, the average one-year forward returns have been 17.85%”, the report highlighted.

At the start of the year, Samco projected that Nifty would trade between 26,277 (all-time high) and 21,281 (election results day low)—both of which are key psychological levels for market participants.

On March 3rd, Nifty recorded 10 consecutive negative sessions, making February its worst-performing month ever—closing in the red for 18 out of 20 trading days (90% negative close rate). Samco conducted a backtest of past instances when Nifty had 8 or more consecutive negative sessions and revealed that since 2002, there were nine instances of eight or more days of consecutive negative closing.

As per the Samco report, the index is currently trading near the lower end of this range, and any dip towards 21,281 is likely to attract buying interest from market participants. This suggests that while further downside is limited, the upside potential remains significantly larger.

Historical trends, oversold market conditions, and attractive valuations all indicate that the worst may be over. Samco Securities believes that investors could see strong market gains over the next six months.

The index closed on a positive note one month later in six out of these nine instances, with an average forward return of 2.68%. 

“With stocks deeply corrected, even a small change in sentiment could trigger a short- to medium-term bounce, especially in stocks that have fallen the most.”

For investors, this period may present a golden opportunity to position themselves for potential market gains as conditions improve.