Why does the stock market mostly fall down on the last Friday of the month in India?

Reasons why the market suffers on the last Friday of the Month:

  • Future & Options(F&O) Expiry (Weekly & Monthly)

This is a phenomenon where Stocks, Nifty, NiftyBank go through changes in volumes which can be on the higher or lower side depending on input news like RBI Policy changes, New Initiatives, Interest Rate Reduction or Geopolitical Developments

Option Value Deterioration Over its Lifetime
Option Chain available on NSE
  • Profit Booking

It is very common for traders and medium-term investors to buy stocks with a short-term (15–30day) horizon. This leads to volatility when they exit their positions

Buy & Sell after holding for short-term by Traders
  • Buy Today Sell Tomorrow (BTST)

It is also very common for traders and medium-term investors to buy stocks and redeem the capital with profit before the T+2 delivery is completed. This is another reason for market volatility

BTST: Buy Today & Sell Tomorrow
  • Residual Effect from Global Markets

Owing to globalization, the Indian Markets move to a certain extent in line with the Global Markets especially NASDAQ, NYSE, FTSE, etc.

Any weakness or correction on Wall Street is replicated on Dalal Street.

Performance of US Market Indices
  • Block and/or Bulk Deals for Exit of Existing Investors

In Bulk or Block Deal, the exchange of shares and money is huge leading to sudden availability or scarcity of shares which can impact the prices of the stock

Bulk & Block Deals: Reasons for change in volatility

Hope you find this helpful for deciding when to enter and avoid the market

Happy Investing!

References:

  1. Options Expiration | Everything You Need To Know — tastytrade blog
  2. What is block and bulk deals? – Market Mantra
  3. 5 ways to book profits on your stock portfolio

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