Nuke deal breaks tradition of bullish August

Mumbai, Aug 26: The month of August, which has generated moderately positive returns for investors in the stock market since the last five years, was highly volatile this year.

The volatility was mainly caused by international factors like liquidity crunch due to subprime disaster, and turbulence in the country over signing of nuclear deal by India. These factors forced marketmen to be cautious and stay away from investments, experts said.

The history of the market for the last five years shows that the stock market has always witnessed an uptrend in the month of August, and the Sensex, known as the barometer of country's economy, has risen in the last five years. But, the Sensex posted a decline of nearly 511 points in the month of August (till August 25) this year.

According to the details about the market movements in the month of August during last five years, the BSE Sensex rose 11.92 per cent in 2003 followed by 8.89 per cent rise in 2006. The Sensex posted a gain of 8.47 per cent in 2002, and advanced by 2.22 per cent in 2005. Similarly, the benchmark index of the country's oldest and largest bourse saw a marginal rise of 0.42 per cent in August 2004.

Analysts feel that markets have started stabilising after world banks injected liquidity and political parties toned down their stand on India's nuke deal.

Strategist and author of ''Mr Market Report'' at the Networth Advisory Services, Mr Ashok Jainani says, ''Emotions tend to drive the market in a few short-lived situations. However, fundamentals rule in the long-term.'' He said investors in such a negative situation tend to give too much importance to the current event, ignoring the underlying fundamentals.

UNI