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Indian stocks will continue their tradition of performing worst in January out of any month as investors take profit following the best annual performance since 2009, according to Sundaram Asset Management Co.
The benchmark stock gauge dropped 1.7 per cent on average in January, falling in eight out of the past 12 years, according to data compiled by Bloomberg. The biggest gains have taken place in September, with an average 5.2 per cent advance.
The Sensex has increased 29 per cent this year, the largest rally among major global indexes after the Shanghai Composite Index, on speculation Prime Minister Narendra Modi will speed up policy changes to bolster growth. International funds have bought $16.5 billion of local shares in 2014.
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"Inflows tend to taper in January as sovereign wealth funds, exchange-traded funds (ETFs) and hedge funds sell and it won't be any different this year," Sunil Subramaniam, deputy chief executive officer at Chennai-based Sundaram Asset, which has $3.5 billion in assets, said in a phone interview. The Sensex may decline as much as five per cent next month, he said.
The Sensex has fallen 4.6 per cent in December, heading for its worst monthly performance since February 2013, as plunging oil prices and a currency crisis in Russia led to a selloff in emerging markets. Foreigners pulled $907 million from Indian shares in the eight days through December 18.
The stock gauge trades at 15.1 times projected 12-month profits, compared with a multiple of 11.1 for the MSCI Emerging Markets Index.
