The Nifty index has shown positive performance in January three times in the past decade- in 2015 with a gain of 6.35%, in 2017 with 4.59%, and in 2018 with 4.72%
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The new year has begun, and every investor in the stock market is eager to understand its potential trajectory. Most brokerages have offered a positive outlook on the market’s performance. However, a retrospective analysis reveals a historical trend of sellers dominating the stock market in January, the first month of the year.
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Over the past decade, Nifty has experienced a bearish trend, with January emerging as a particularly challenging month. Seven out of the last ten Januarys have seen Nifty close in negative territory. This downward pressure can be largely attributed to significant selling by foreign institutional investors (FIIs). Over this ten-year period, the average return for Nifty in January has been a meagre 0.38%.
The Nifty index has demonstrated positive performance in January on three occasions within the past decade: 2015, 2017, and 2018, registering gains of 6.35%, 4.59%, and 4.72% respectively. Conversely, the most substantial January decline for Nifty in the last ten years occurred in 2016, with a fall of 4.82%. This was followed by a decline of 2.48% in 2021. The years 2019, 2020, 2022, 2023, and 2024 experienced declines ranging between 0.03% and 2.45%.
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FIIs were mostly sellers
Over the past three years, Foreign Institutional Investors (FIIs) have consistently withdrawn significant sums from the domestic stock market in January. This trend is evident in their selling activity: Rs 33,303 crore in 2022, Rs 28,852 crore in 2023, and Rs 25,744 crore in January 2024.
Examining previous years reveals a mixed pattern. FIIs were also net sellers in January of 2016, 2017, and 2019, offloading shares worth Rs 11,126 crore, Rs 1,177 crore, and Rs 4,262 crore respectively. Conversely, they favoured investment in 2015, 2020, and 2021, emerging as net buyers with investments totalling Rs 12,919 crore, Rs 12,123 crore, and Rs 19,473 crore respectively.
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Domestic investors were buyers
Domestic institutional investors (DIIs) acted as net buyers seven times in January, while being net sellers thrice. DIIs bought equities worth Rs 33,412 crore in 2023.
They bought shares worth Rs 26,744 crore in 2024 and invested Rs 21,928 crore in the market in 2022 as well. From 2016 to 2019, DIIs bought domestic equities between Rs 12,875 crore and Rs 399 crore in January. DIIs were net sellers in 2015 (-Rs 7,882 crore), 2020 (-Rs 1,567 crore) and 2021 (-Rs 11,971 crore).
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How will the trend be this time?
According to brokerage firm Nuvama the stock market environment has remained cool in January in the last decade. Nifty closed in the red 70% of the time. Nifty Bank’s performance has been mixed. Even in January 2025, Nifty will struggle to cross the level of 24,350 and without strong participation from FIIs, it will remain a ‘sell-on-rally’.
