Why does the stock market struggle during Kumbh Mela?
a must read for every investor
Hey there! Tuesdays are the underestimated heroes of the week - a perfect day to recalibrate, refocus, and charge ahead. Today’s your chance to do something that your future self will thank you for.
But before we start, here’s a dose of positivity for you:
‘It’s not whether you get knocked down, it’s whether you get up’
Now, let’s get started with the story
Kumbh Mela 2025: The time for stock market cleansing
SAMCO Securities, in a recent analysis, has drawn a compelling analogy between the Kumbh Mela’s spiritual cleansing and the stock market’s own cycles of growth and loss.
Apurva Sheth, the Head of Market Perspectives and Research at SAMCO, examined market performance during the six Kumbh Mela events held in the last two decades. His findings reveal a fascinating and somewhat peculiar pattern in the stock market behavior during this period.
The Kumbh Mela effect on the BSE Sensex
The analysis of the BSE Sensex during the last six Kumbh Mela events - spanning 20 years has shown a striking trend: the Sensex has posted negative returns for the entire duration of the Kumbh festival each time. This observation is not a mere coincidence, as the market seems to follow a pattern of decline during this spiritual event.
The average loss for the Sensex during the Kumbh Mela period has been 3.4%, with the festival typically lasting about 52 days. The most significant loss occurred during the 2015 Kumbh Mela, spanning from July to September when the Sensex plunged by 8.3%. Another notable dip was recorded during the 2021 Kumbh Mela, with the Sensex falling by 4%.
While these losses may seem unusual, they are not completely surprising when we consider the broader socio-economic landscape during the Kumbh period. Traditionally, the Kumbh Mela attracts millions of people to the banks of the river to take a holy dip. The scale of this event causes significant disruptions in daily activities, including business operations and economic activities in the region. This, in turn, can influence broader market sentiment and lead to bearish trends.
The six-month post-Kumbh rally
Interestingly, the stock market’s fortunes appear to have changed after the Kumbh Mela period. According to Sheth, in five out of the six instances, the BSE Sensex showed positive returns in the six months following the Kumbh Mela. On average, the Sensex gained 8% in the post-Kumbh period. The biggest rally came after the 2021 Kumbh Mela, when the Sensex soared by nearly 29%.
Other strong performances included the 2010 period, where the Sensex gained 16.8%. However, not all post-Kumbh periods have been positive. The 2015 post-Kumbh period saw a negative return of 2.5%.
So, why does this happen?
First, the timing of the Kumbh Mela often coincides with periods of uncertainty in the global and local economy, which may result in collective pessimism affecting the stock market. As millions of people converge at the event, business activity may slow down, creating an economic lull that reflects in market performance.
Second, there could be broader cultural or psychological factors at play. The Kumbh Mela is a time of introspection, spiritual cleansing, and reflection, and it is possible that this period of reflection may mirror the market’s own cycles of growth and contraction. Markets, after all, are driven by human emotions and collective behavior, and the energy around such an important event might influence investor sentiment.
Finally, there is the possibility that this pattern is purely coincidental. The stock market is influenced by countless external factors, ranging from geopolitical events to economic policy changes. While the Kumbh Mela's timing could be coinciding with certain market dynamics, the consistent pattern over the years is still noteworthy.
What investors can learn from this?
Investors might find valuable lessons in this correlation between the Kumbh Mela and market performance. Given the historical trend of negative returns during the Kumbh period, it may be prudent for investors to adopt a more cautious and risk-averse strategy during the festival.
While it is difficult to predict market movements with certainty, understanding the cyclical nature of the market during this period could help investors manage their expectations.
That’s it for today.
See ya 👋
