Sensex hits third longest losing streak!

An analysis of negative daily returns over 15-day periods.

Published: February 28, 2020 at 12:20 pm

Sensex closed today (28th Feb 2020) at 38,297.29 which is 3.64% lower than yesterday. This means 12 negative daily returns out of the last 15-day window. This (12/15) is the third-longest losing streak over this window in the history of the Sensex. If the Sensex heads South next week, more records could be equalled (hopefully not broken)!

From April 1979, if we study the number of negative daily returns over a rolling 15-day window, there has been at least one negative daily return ( red day) in every possible window (9411). This means the Sensex has never moved up for 15 days straight!

  • Two red days (2/15): 9401/9411
  • Three red days (3/15): 9315
  • Four red days: 8966
  • Five red days: 8264
  • Six red days: 7160
  • Seven red days: 5718
  • Eight red days: 4508
  • Nine red days: 2523
  • Ten red days: 1299
  • Eleven red days: 479
  • Twelve red days: 120
  • Thirteen red days: 18
  • Fourteen red days: 1
  • Fifteen red days: 0

This is shown graphically below in log scale to highlight the “knee point” which occurs around 8/9 red days. The frequency of 9/15 red days is 44% lower than 8/15 red days! The frequency of 10/15 red days is 48% lower than 9/15 red-days and 71% lower than 8/15 red days. This means the stock market does not run away up or down in an uncontrolled manner. Frequent and infrequent trading prevents this from happening.

No of times sensex daily returns were negative over a 15-day rolling window since April 1979
No of times Sensex daily returns were negative over a 15-day rolling window since April 1979

In the featured image above, you can see the number of 12 red days since 1st Jan 2012.  Today (28th Feb 2020) is the 26th such instance. We last saw this in May 2019

Notice from the listing above, we have seen 120 such 12/15 streaks but only eighteen 13/15 streaks and just one 14/15 occurrence! If the markets continue to fall on Monday (2nd March) and Tuesday and Wednesday then it would be 13 red days out of 15. The last such instance was in May 2019 and Nov 2015 prior to that.

If the Sensex also falls on Thursday (March 5th) it would me 14/15 – the only second instance! The longest losing streak was between 28th Aug 2001 to 17th Sep 2001 when the Sensex fell from 3313 to 2681.

Those with enough money in the market would not want a repeat of that, while those who have just begun their investment journey would naively look forward to it.

It should be noted that 12/15 red days is significantly more common than 13/15 (almost seven times more). So although it may not seem like much of a step up, it is a significant climb (thankfully!)

What should investors do? Those who already have an asset allocation strategy in place for specific goals in minds have nothing to do! Those part of the goal-based portfolio management group would also know how to handle adverse return sequences.

Those who practice a specific tactical asset allocation strategy would also know what to do. Those who do not have a plan can either create one for themselves, get paid help from our list of SEBI registered fee-only advisors or forever remain confused!

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About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
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