Will Nelson's magic work again for Sensex on Friday?

8 Aug, 2008, 0628 hrs IST,Ranjit Shinde, ET Bureau
Does numerology work in stock markets? Call it a coincidence, but the so-called Nelson dates have proven to be luckier than some of the other days, for investors.

An ET Intelligence Group analysis shows that the investors who chose to invest in the benchmark indices on dates with three common digits, such as 05/05/05, 06/06/06 etc, in most cases earned positive returns at the end of the corresponding calendar year. The findings appear quite interesting given that Friday is yet another Nelson date (08/08/08).

In the current decade so far, there have been seven instances when the calendar dates had three equal digits. Of the seven days, Indian bourses were open for trading on four of those sessions including January 1, 2001, March 3, 2003, May 5, 2005, and June 6, 2006. Barring the first instance (i.e. 01/01/01), had investors placed their bets on the Sensex or Nifty on all other days, they would have earned returns by the end of the same year .
Market was closed on the dates February 2, 2002, April 4, 2004, and July 7, 2007. If we consider investments made on a trading day immediately preceding any of these days, investors would have still raked in money at the end of the corresponding year.

Though the impact of Nelson dates on Indian bourses sounds intriguing, experts dismiss it as a coincidence. “You need at least 30 observations for any event to be statistically proven. In the case of Nelson dates, the sample size always fails to meet this basic criterion of statistics,” says Deepak Mohoni, a noted technical analyst who had coined the term Sensex in the eighties. “This makes the observations as mere case of coincidence.” He also warns investors not to read too much out of the findings.

Another point worth noting is the fact that for most of the period under observation, Indian bourses were witnessing a bull run that saw share prices soaring like never before. The fact largely influences above findings. Further, returns earned from the exercise are spread unevenly on the time axis.

For instance, an investment made on March 3, 2003, and held until the year end would be spread over 10 months. This is a larger time frame compared to the period of eight months had the investment been made on May 5, 2005, and held till December 31, 2005.

All said, the question remains. Will the miracle work on Friday, which is the eighth day of the eighth month of the eighth year of this century? Although a definitive answer is elusive, the 200 day moving average (DMA), the Lakshman Rekha between a bull and bear market, throws up an interesting point.

On all the past seven occasions, the Nifty was above its 200 DMA. If one gives the credit of the previous positive performances to this fact then things take a twist. Friday is the first occasion, when Nifty goes into a Nelson day, perched well below its Lakshman Rekha.

If the past performances mean anything, this may also become the first occasion post-bull run, when the benchmark index generates negative returns in the remainder of the year.