A STUDY OF THE DAY OF THE MONTH EFFECT IN NIFTY50 AND SENSEX
DOI:
https://doi.org/10.62737/2rfphd06Keywords:
Day of the Month Effect; Calendar Anomalies; Indian Stock Market; SENSEX; NIFTY 50; Dummy Variable Regression; Market EfficiencyAbstract
This research examines the existence of the Day of the Month Effect within the Indian stock market by analyzing whether daily stock returns display systematic trends linked to particular calendar days. Utilizing daily return data from two prominent benchmark indices—the SENSEX and NIFTY 50—the study applies dummy variable regression models to detect statistically significant return behaviors specific to certain days. Before estimation, the stationarity of the return series is verified through the Augmented Dickey–Fuller (ADF) test.
The empirical findings indicate a statistically significant and positive return on the first trading day of the month for both indices, offering compelling evidence of a turn-of-the-month effect in the Indian equity market. Conversely, returns on the other trading days, including the last days of the month, are predominantly statistically insignificant, suggesting a lack of a consistent end-of-the-month effect. These results imply that daily stock returns mainly adhere to a random pattern and are more influenced by overarching market dynamics than by calendar-specific elements, except for the early-month return premiums.
The identified turn-of-the-month effect may be linked to institutional fund inflows, portfolio rebalancing activities, investor sentiment, and the timing of macroeconomic announcements at the month's outset. In summary, the findings suggest that while short-term trading strategies might capitalize on early-month return patterns, the Indian stock market predominantly demonstrates weak-form efficiency. This study adds to the body of literature on calendar anomalies in emerging markets by offering updated empirical insights and emphasizing the changing nature of market efficiency in India.
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