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Should you sell stocks in May? No, say analysts

Long-term investors can stay put in the markets, but should brace for volatility


Puneet Wadhwa  |  New Delhi 

Is the worst over?

    A good monsoon is crucial to our current bullish stance: Samir Arora

    Indian markets will see a de-rating in near term: Mahesh Nandurkar

    We expect over 30% returns in two years: Mahesh Nandurkar

    Will winter session surprise the markets?

    Markets bounce back 2%. Should investors sell?

May is traditionally considered a bad month for equity like Europe and the US as the fund managers there typically go on a long summer vacation.

Also Read: Devangshu Datta: Uncertainty still the name of the game

Read more from our special coverage on "MARKETS"

In the past 10 years (since 2006), Indian have given a positive return on five occasions. In 2009 they rallied 28% when the post the election outcome that saw the United Progressive Alliance (UPA) government take charge for the second consecutive term. May 2014 also saw the gain 8% after Narendra Modi-led NDA got an overwhelming mandate post the general elections.

Also Read: FPIs stay glued to Indian market, pump in $2.2 billion in April

On the domestic front, some of the factors that will determine the market sentiment this year include the outcome of general elections, status of key Bills in Parliament's Budget session that concludes on May 13 and march quarter earnings of corporate India.

At a global level, markets will be eyeing how commodity prices, especially crude oil, pan out. That apart, the markets will also be preparing for the Britain's vote in June on whether to stay in the European Union or not.

So, should you ‘sell in May and go away?’


Given this backdrop, analysts suggest long-term investors should stay put in the markets, but should brace for volatility. Since the presentaion of the Union Budget in February, the markets have gained nearly 13% on the back of supportive domestic and global factors.

Also Read: Caution emerges as mid-caps, small-caps rally past indices

In a recent interview to Business Standard, Mahesh Nandurkar, India Strategist, CLSA said that he doesn’t see any big positive triggers for the market. On the contrary, he thinks there could be a few sentimental dampeners.

Equity investing should be for longer than a year’s perspective, believes Samir Arora, Founder and Fund Manager, Helios Capital.

Arora says that the Indian market is in a good position right now, with a cyclical upturn underway in the economy. The monsoons are expected to be good, interest rates have been cut and going ahead, we can expect more (rate) cuts. Corporate profits, too, should grow by mid-double digits, albeit partly due to the low base of 2015-16. Although it is difficult to predict the very short term, he says in general market should do well.

Also Read: Goldman sees start of upturn in corporate profits

"I normally ask investors to invest in two or three instalments -- that is mentally easier for an investor to follow, as he feels he is not totally committing to a strategy right away. Generally speaking, since we expect equity markets to do well, the advice for the investor would to be get going," he says. CLICK HERE FOR THE FULL INTERVIEW

“We believe that while any possible failure of forthcoming monsoon would be a risk factor from the domestic front, any rise in the deflationary pressures – possibly from further slowdown in the US economy – would be a risk factor from the global front,” points out G. Chokkalingam, founder & managing director, Equinomics Research & Advisory.

Also Read: This is a good time to buy from a one-year perspective: Vineet Bhatnagar

“In our view, it is little early to worry on both fronts in the short-term. While we will continue to remain alert on both monsoon performance and global deflationary pressures, we suggest our investors to stay invested – with an exposure of 35% overall wealth for an average conservative investor – with stock specific approach,” he adds.

Sensex chg (%) Nifty chg (%)
May-93 3.3 5.4
May-94 2.2 3.2
May-95 7.0 5.9
May-96 -2.7 -2.2
May-97 -2.2 -2.7
May-98 -8.0 -8.3
May-99 19.2 15.8
May-00 -4.8 -1.9
May-01 3.2 3.8
May-02 -6.4 -5.1
May-03 7.5 7.8
May-04 -15.8 -17.4
May-05 9.1 9.7
May-06 -13.7 -13.7
May-07 4.8 5.1
May-08 -5.0 -5.7
May-09 28.3 28.1
May-10 -3.5 -3.6
May-11 -3.3 -3.3
May-12 -6.4 -6.2
May-13 1.3 0.9
May-14 8.0 8.0
May-15 3.0 3.0
Source: BS Research Bureau

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First Published: Mon, May 02 2016. 10:12 IST