Markets break May jinx; no 'sell in May and go away' in 2014

The popular stock market adage 'Sell in May and go away' proved to be wrong for Indian stocks during May this year as the benchmark Sensex gained a whopping 1,800 points, its best monthly gain in recent times.

Indian stocks rose sharply and scaled new record highs last month, with the benchmark index Sensex rising above 25,000 on hopes of economic revival after NDA stormed to power at the Centre and Narendra Modi became the new Prime Minister.

The 30-scrip Sensex gained 1,799.54 points, or 8%, to end at 24,217.34 last month, breaking the May jinx.

Domestic stock markets bucked the trend of a downfall this year that was seen for three consecutive years in the month of May till 2012.

The Sensex had gained 24.53 points in May 2013. It saw an over 6% drop in May 2012. In 2010 and 2011, Sensex fell around 2.5% in May.

The BSE Sensex touched a record high of 25,375.63 on May 16 this year, the day results for the general election gave Bharatiya Janata Party a clear mandate.

"BJP coming into power with full majority has enthused markets. And as the bull run continues, the euphoria around the Modi government helped break the jinx of Sell in May go away," said Ashika Stock Brokers, Research Head, Paras Bothra.

The strong upmove in the market has also been supported with smart foreign fund inflows. Overseas investors have pumped in nearly Rs 34,000 crore in the Indian market in May.

In previous years, May has been mostly bad for the stock markets globally, but the Indian markets mostly swung between gains and losses during this month till 2009.

The "Sell in May and go away" strategy says that an investor who sells stock 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.