This stock market behaviour can help you predict Cricket World Cup winner

In four out of the last five World Cups, the day the Sensex did this during the league period and the team won or lost the match on that day - if not a World Cup winner has at least been a finalist.

In a nation where Cricket is treated like a religion, Bollywood an obsession, Stock Market is not far behind in terms of creating fascination among the masses, especially given the steep rise in market participants in the post Covid-19 era.

Frenetic fans have created idols and demi-gods of the so-called legends in cricket and Bollywood. And now, with the cricket World Cup 2023 underway in India, fans are strongly rooting for the home team to taste glory yet again, just like it did in 2011 on home soil. 

However, there are other strong contenders too – like the five times champion Australia, defending team England, meticulous New Zealand and the dark horse Pakistan. So, here’s the million-dollar question – which team will lift the cricket World Cup 2023 trophy on 19th November.

Today, traders in the market do not shy away from taking risky bets in both cash or derivatives market, based on news based triggers, market buzz, self-studies or mere speculation. Most traders look at historic trends to predict the possible future trend, be it based on technical analysis or AI (artificial intelligence).

But can the behaviour of the stock market, help you predict the World Cup winner? Here’s what history suggests.

Hocus Focus

Predicting the winner, when the tournament has reached its last legs can be a relative easier task, as one need to shortlist from just the last four. However, betting on who could be the potential winner during the league games can be challenging as you need to choose one from all participants. This year there are 10 teams, while the maximum number of participating teams was 16 in the 2007 edition.  

While cricket and stock markets do not have any direct co-relation, an analysis of the S&P BSE Sensex data, during the league phases of the last five cricket World Cups shows an interesting analogy. There seems to a definite connection between a particular price movement in the Sensex and the likely finalists, if not the winner of the World Cup in that particular year.

Let me explain, England won the World Cup in 2019, Australia in 2003, 2007 and 2015, India in 2011. There were a total of 26 trading sessions during the leagues matches in the year 2019, 19 in 2015, 19 in 2011, eight in 2007 and 16 in 2003.

Here's the link...

In four out of the last five World Cups, the day the Sensex registered its biggest single-day gain during the league period, the team winning the match on that day or in case if there was no match, then the team winning the very next match has been a finalist.

That's not it, in the first three World Cup editions of the 21st century - 2003, 2007 and 2011; the team winning the league match on the day Sensex posted its biggest single-day gain has reached the finals, but alas was defeated by its opponent. 

Here's what actually happened...

The league phase in 2019 was from 30th May to 06th July, during this period the highest single day gain the Sensex logged was 1.4 per cent on 03rd June. That very day, England lost to Pakistan in a World Cup match. Rest we know is history, England went on to clinch the World Cup.

In the preceding World Cup of 2015, the league phase was from 14th February to 15th March in two groups, and the Sensex logged its highest single-day gain on 27th February, up 1.65 per cent. 

In Group A, there was no match on that particular day. However, following day there were two matches, in which, Australia defeated New Zealand and India won against UAE. Eventually that year, India lost to Australia in the finals. 

Meanwhile, in Group B, South Africa had won over West Indies on 27th February; the former reached the Semi-final round, wherein it lost to New Zealand. In a way, all four teams in the picture around that date, turned out to be semi-finalists.

 

In 2011, Sensex had zoomed 3.5 per cent on 01 March, the very day Sri Lanka defeated Kenya. 19 days later Sri Lanka played the finals at Mumbai’s Wankhede stadium against the then crowned winner India.

Similarly, in 2007 and 2003 New Zealand, India and Sri Lanka were the match winners on the day Sensex rallied the most. Eventually, New Zealand bowed out in the semis in 2007, while Sri Lanka exited from the semis in 2003, and India lost the finals in the same year.

Will history repeat itself? This year the league rounds will take place till 12 November. Keep a close eye for the big rally day and the match contenders. One of the team may go all-the-way to lift the World Cup 2023 or at least is likely to be a finalist.

Overall Market Performance during the World Cup League Phase

That apart, here's another interesting observation - the market has kind-of given a marginally negative return till the mid-point of the league rounds. The max loss has been 0.9 per cent in the year 2015. 

However, the net returns during the second half of the league phases are more prominent. In the year 2007 and 2011, the Sensex surged 7.5 per cent and 8.2 per cent, respectively during the latter half of the league games. Whereas, in 2003, 2015 and 2019, the BSE benchmark index slid 4.3 per cent, 3.9 per cent and 1.5 per cent.

 

This year too, the Sensex may behave in a similar fashion. On the day of the first match, 05 October the BSE benchmark gained 0.62 per cent. The mid-way point of the 2023 World Cup is 27th October. The markets may deliver tepid returns till that period as the sudden escalation of war between Israel and Palestine-based militant group Hamas over the weekend may dampen the already sluggish mood across global markets, as Crude Oil prices could rally.

Further, a spike in bond yields following RBI’s comment on likely OMOs (Open Market Operations) to suck out excess liquidity, globally central bankers’ stance on higher-for-longer rate regime and upcoming busy election schedule in India is likely to weigh on the sentiment.

However, towards the end of the month which coincides with the mid-point (27 October) of the World Cup league phase, some stability may return to the market, as by that time a good amount of corporate results will be out and could help in setting a directional move for the markets.