The
popular stock market adage 'Sell in May and go away' strategy is
unlikely this year also, experts say, adding there can be a near-term
volatility based on global events. "Sell in May and go away is
not a good strategy in India as accepted in global market. As per the
history of the last six years, the average return during May-October
is positive at 7.33 per cent. Hence, this period does provide a good
chance to have positive return," said Vinod Nair, Head Of
Research, Geojit BNP Paribas Financial Services Ltd. The strategy
says an investor, who sells holdings in May and gets back into the
equity market in November, avoiding the typically volatile
May-October period, would be better off than an investor who stays in
equities throughout the year. "The underlying domestic
fundamentals are positive and there are prospects for above normal
monsoon, signs of revival in earnings outlook going forward. So, we
believe there should not be any situation to avoid May-October period
though there can be near-term volatility based on global events, a
major sell-off is not likely rather than volatility in the near-
term," he said. The benchmark BSE Sensex in May 2010 fell by
2.53 per cent, while in 2011, the index lost 2.6 per cent and tumbled
6.26 per cent in May 2012. The Sensex, however, gained 1.31 per cent
in May 2013. In 2014, it had gained 8 per cent, while last year it
went up by 3 per cent. "We don't think that this strategy is
likely to work this year. If we analyse the last 11 years data of
Sensex of May month, we will find that in six out of eleven years
Sensex returns were positive. So we can assume that this strategy
does not work every year and this phenomenon works once in a while,"
said Nirdosh Gaur Managing Director and CEO Moneypalm. Volatility is
part and parcel of stock market and it can see volatility in any
month or period of the year, Gaur said. "Sell in May and go away
strategy is unlikely although the market may fall but not in a big
way," Vijay Singhania, Founder-Director, Trade Smart Online
said. The 30-share index has gained 0.62 per cent so far this month
and experts see the positive momentum going ahead amid chances of
earnings growth in FY17. "Following factors will decide the
trend in markets over the next few weeks -- further insights into the
arrival and progress of monsoons, remaining quarterly results,
movement in crude prices and in the dollar index," said Dipen
Shah, Senior Vice-President & Head of Private Client Group
Research, Kotak Securities. We believe with supportive macro
indicators and corporate performance on the mend, investors will be
attracted towards the markets. We also believe that equity markets
will offer better relatively returns over the course of the fiscal,
Shah added. On what would be the driving force for the stock market
going ahead, he said, improvement in corporate performance, good
monsoon and continuing easy liquidity globally.
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