MAYHEM OR NOT

MARKET MOVEMENTS IN MAY

Usually, month of May is associated with considerable volatility in Stock market and considerable fall / rise is also noticed. Saying in the market is “Sell in May and Go Away”. But how far this is correct? Normally,
investors and traders are very much concerned about the fall of market whenever May month comes. But this is not always correct.  Net Average fall of sensex during the last 22 years is a mere 0.77% in May, which
is not material enough to be panicky.  Insignificant net average fall does not lead to any definite conclusion.  However, a different kind of analysis leads us to an  interesting  conclusion.
If we carefully observe the pattern of rise and fall each year,  it normally rises in Odd years and falls in Even years , as tabulated below and the extent of rise in odd years is 7.10% and fall in Even year is -7.87%. Average Volatility (difference between high  and low levels of index) during May is more than 10%.)

During  even years, market had fallen in 10 out of 11 years and during  Odd years, market had risen in 9 out of 11 years. Can we assume that current May 2014 also is going to be a negative month? Further, during the current year, Election outcome would come out on 16^th May and would determine the market movement. Hence it could be different too!!!.

As  an even year usually  records an average fall of about 8%  as observed during the last  22 years, can we expect a similar fall this year also ? If
 the market records the average fall of 8%, Nifty may witness fall of more than 500 points and may revisit 6200s and come close to 200DMA.  Further,  market movement depends on several factors such as fundamentals of economy, technical set up of  market, Funds flow into market, investor sentiment, geo
political factors etc.,

If Nifty has to fall this year, political factors would be the key driver and let us hope the best for the country, economy and market and the above analysis is only statistical and let us hope that it does come out true due to political reasons.

Time only can tell which way market would move!!


Even Year                                                      Odd Year
            Sensex Inc/Dec  %                 May Sensex      Inc/Dec %

1992    3006       -881  -22.67            1993    2192        70       3.30
1994    3829         83      2.22            1995     3351      218     6.96
1996    3725      -101     -2.64           1997      3755      -86     -2.24
1998    3686      -321     -8.01           1999      3964     638     19.18
2000    4434      -224     -4.81           2001      3632     113     3.21
2002    3126      -212     -6.35           2003      3181     221     7.47
2004    4760     -895    -15.83           2005      6715      561     9.12
2006    10399   -1644  -13.65           2007    14544      672     4.84
2008    16416     -871   -5.04            2009    14625   3222    28.26
2010    16945     -613  - 3.50            2011     18503   -632    -3.3

2012   16219     -1100  -6.35            2013     19760   254     1.30

2014      ???     (22418 as on 30.4.14)
        Average         -7.87                                                    7.10

Net fall     -0.77%