Are there Monthly and Turn-of-the-Month Effects in Indian Stock Market?: Evidence and Implications

The seasonal components of stock market returns have been extensively documented, yet the major part remains unexplained. The monthly effect has been reported in several international stock markets. The objective of this paper is to examine the existence of monthly effect and turn-of-the-month effect in Indian stock market by using S&P CNX Nifty index over the period from January 1994 to April 2005. The results reveal significantly high mean daily returns for days immediately before and during the first half of the month, especially, during the first few trading days of the month and indistinguishable from zero or even negative mean returns for the second half and the rest of the month. Turn-of-the-month is marked by abnormally high returns. This gives a strong evidence of existence of monthly effect and turn-of-the-month effect in Indian stock market.