The month of the year effect in the Indian Stock Market: An analysis of the impact of market, industry and size of the firm

The research examines the month-of-the-year effect in the Indian Stock Market for a period of ten years, using daily returns calculated on the NSE Indices, following a regression-based approach. The effect of seasonal abnormalities on the market as whole, on different sectors of the market and the relationship between calendar effects and the firm size is studied. The results show that market returns are significantly different in January, October and December. The Smallcap index returns give evidence of a small cap effect with significantly different returns in January, February, June, October and December. The analysis of the returns of sub-market sectors is also indicative of the presence of Calendar anomalies. Eight out of ten show presence of seasonalities in their returns. However, only in the case of Banking and Financial sectors, such effects were absent. The results of the study can help an investor take informed decisions regarding the stock returns. Also the regulatory bodies may look into the informational efficiency aspect of the stock market in more detail.