Will October be a turnaround month for the stock markets?

October has been believed to be a turnaround month. Analysts said that we are entering into October after a blockbuster one month where the markets crossed the 17,000-mark in September. There have been a $3.3-billion FII inflow, the market is up over 10 per cent, and up 24 per cent for the year.

October has historically been one of the weakest months for the Sensex. Over the last 17 years, since 1990, there have been five positive Octobers versus 12 negative ones. The average returns in October have been 2.6 per cent negative returns.

However, there has been a slight change. Over the last three - four years, since the bull run began in 2003, the average returns in October have been about 1.8 per cent. There has been only one negative October, in 2005, when FIIs sold $800 million worth of shares.

Prior to that the highest negative months were in 1992 and 1993 when the market was down about 10 per cent. However, positive Octobers started from 2003, in the bull run when the markets were up 10 per cent. Last October, the markets were up 4 per cent, on the back of strong FII flows and it had the strongest October FII flows of $1.7 billion.

Analysts added that it is going to be a very interesting month. We are going in with the highest open interest of about Rs67,000 crore and stock futures are at 70 per cent of the total futures position. That poses some risk. The PCR is down to about 1.13, with the markets rallying up. The Nifty IV, despite the market rallying up, is still very high at 27-30 per cent.

The important dates to look out for in October, is the day the US Federal Reserve meets - 31 October. The RBI will meet to review the credit policy on 30 October and the result season will start on 11 October, with Infosys kicking off its Q2 results.