October has traditionally been a scary month for stockmarkets. Remember October last year, when the Sensex fell from a high of 8821 (reached on the 5th) to a low of 7656 on the 28th, a fall of 13.2 per cent in a little over three weeks? The sell-off was even more dramatic among the small- and mid-cap stocks.
It is not just last year’s traumatic experience that makes market players nervous about October. The month has been associated with some of the worst crashes in market history. It was in October 1929 that the Dow Jones Industrial Average fell precipitously, ushering in the Great Depression. On 19 October 1987, the Dow plunged 22.6 per cent on a very Black Monday. Ever since, the market has been wary about the ‘October Effect’, a wariness more recently reinforced by the Asian crisis, when the Hong Kong market fell more than 10 per cent in two days in late October, 1997.