Mumbai: The old stock market adage ‘Sell in May and go away’ has not been proven true consistently for Indian equities for several years now. Benchmark Nifty, which closed at 22,604 on Tuesday after hitting a new high of 22,783 during the day, has closed positive in May on seven occasions in the last 10 years, ending flat on one and lower twice.
But some investors might be tempted to consider selling this time as the general elections are feared to induce sharp swings in equities. Investors are also growing nervous about the US Federal Reserve delaying interest rate cuts as expected by the financial markets. The central bank’s policy meeting on Wednesday night is expected to give investors some cues on the interest rate outlook. ET spoke to four analysts on whether the seasonality factor of the ‘Sell in May’ adage could be valid this time. While volatility is anticipated, these analysts do not see a disruption in the recent bullish trend that could push the market to new highs. They expect bank stocks to drive the market, while advising against leveraged bets in equities for now.
Abhilash Pagaria,
Head of Alternative & Quantitative Research, Nuvama
Based on seasonality, in the last 10 years, Nifty in May has closed positively 70% of the time with 2.5% gains, while Bank Nifty has been positive 80% of the time with 3.7% gains. The benchmark is likely to make all-time highs in May. Before the elections, there can be some pullback, but no major corrections are expected unless the election results are not in line with street expectations. Derivative positions indicate a lot of bullishness since domestic investors (HNIs and retail) have rolled over long positions. As foreign investors have not deployed funds, there is no major scope for outflows also.
Sriram Velyaudhan,
Senior Vice President, IIFL Securities
The price action is expected to be on an upward trajectory in May. The bullish trend will continue since markets have been range-bound for close to four months and optimistic monsoon and election outcome expectations will support the trend. The Nifty was holding above the 22,700 levels which was a positive sign until the nervousness pared the gains on Monday. The trend will be bullish once the index stays strong above 22,700 levels.
Rajesh Palviya,
Senior Vice President, Research – Technical and Derivatives, Axis Securities
This May is different due to the general elections which would have a large impact on the markets. The bias is on the bullish side itself. While the index could make new highs above 23,000 levels, May is likely to register a minimum of 3-4% gain but may also be up to 5%. There is no reason whether one considers earnings, interest rates, or monsoon expectations that indicate investors are likely to sell in May. Corrections could be used as buying opportunities for quality stocks and investors should wait for such dips.
Vaishali Parekh
Vice President – Technical Research, Prabhudas Liladher
There is an upside up to 22,800-23,500 in Nifty based on technical indicators; however, a broad-based correction is likely since valuations have run up a lot. Nifty, Bank Nifty, and Midcap Index are at resistance levels, hence advisable to be cautiously optimistic. The market is in an overbought zone and profit booking is anticipated. While the first half of May is expected to see an up-move, closer to the election outcome, corrections are likely. The corrections could be up to 20,500 levels from the high of 23,500. If Nifty breaks the near-term support of 21,700 then it could indicate a reversal in trend.
