Why are BSE and NSE volatile before Diwali?

The BSE & NSE have indices that change as per

  1. The sentiment (Earnings Downgrade etc.)
  2. International/Domestic Events (War, Strike, Blockade, etc.)
  3. Commodity Price Fluctuations (Crude Oil, Iron Ore, etc.)
Bombay Stock Exchange & National Stock Exchange: Major Stock Exchanges in India

In the current scenario, we need to observe the benchmark NIFTY50

Nifty 50 Six-Month Return: ~20.8%
Nifty 50 Twelve-Month Return: ~50%

The stocks have risen on the back of good earnings, robust recovery post-second Covid-19 wave, and an increase in demand.

Now coming to the question:

Why are BSE and NSE volatile before Diwali?

Observation driven Question by an Investor

The reasons are not so trivial.

Yes, profit booking does happen before public holidays or during options (monthly/weekly) expiry but the volatility at least in the current scenario has more to it:

  1. Global Chip Shortfall affecting different industries
  2. Exponential Increase in Crude Oil Prices
  3. Tempering of Commodities Demand
  4. Borrowing by the Government to meet spending/infrastructure target
  5. Looming Threat of the third wave that is now hitting China and Russia
  6. Indian stock market rating ‘Downgrade’ by Morgan Stanley, UBS, Nomura
Global Chip Shortage: Problem Initiated since Covid-19 First Wave
Crude Oil: A major commodity impacting economies

Considering this, the correction would have happened irrespective. The timing that happens to be close to Diwali is no more than a coincidence.

Hope you find this helpful

Please Feel Free to share and Contribute if you like our work.

God Bless!

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