Indian market sees best May in a decade

The month of May has turned out to be the most fruitful for Dalal Street this year, with investors reaping returns of as much as 28 per cent -- the highest gains seen in a decade in the month.

The benchmark index, the Sensex, gained about 3,000 points in May settling at 14,625.25 from 11,400 levels at the end of April.

The market behaved in a totally different trend from the past in May this year as usually investors prefer to book profits and get into a selling mood in the month.

An analysis of the returns provided by the Sensex in the months of May over the past 10 years shows five times the index had provided negative returns, while in the rest five years it had ended in the green territory.

The years when investors had reaped positive gains included 2007 (3.88 per cent), 2005 (9.11 per cent), 2003 (7.46 per cent), 2001 (3.2 per cent).

The Sensex's over 28 per cent jump in May this year, makes the biggest gains in a month over the past 10 years.

The analysis reveals that every gain alternated with a loss and in May 2008 Sensex gave a negative return of 5.04 per cent. Significantly, the return was 19 per cent in May 1999, which was during the dotcom boom.

Interestingly, investors did not follow the age-old stock market proverb of selling in May this year, with the Sensex gaining over 28 per cent in a single month.

The 'Sell in May' adage is premised on the belief that the market has strong growth potential between November and April, while investors sell in May as they book profits.

Analysts said that the theory was developed as the second half of the year is generally more vibrant and investors usually buy during that period.

"The whole scenario is a different one this year due to the election time in addition to the uncertain economic situation in the global markets.

The market outperformed this time as positive sentiments were building up and the positive election outcome gave an additional trigger for a surge in the stock market," a leading analyst in a domestic brokerage firm said.