How will January 2010 end for the markets? That seems to partly depend on how the first week ended. A study conducted by Moneylife has found that on most occasions, a positive start to the first week has led to the market gaining for the entire month of January. Over the last 19 years between 1991 and 2009, on 13 occasions the market made gains during the first week. Out of this, on nine occasions, the index also ended the month at a higher level. The Sensex has closed the first week of this year at a higher level, so this is a positive signal for investors. The phenomenon of the index closing higher at the end of the first week is explained by the fact that market participants start the New Year on a bullish note. Interestingly, of the nine times that the index ended higher for the first week as well as the entire month, on six occasions, it also ended the March quarter at a higher level.

What happens when the index ends the first week on a negative note? Interestingly, the same trend persists. Of the six times when the Sensex declined in the first week, on five occasions it also ended the month at a lower level.

— Moneylife Research Team