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The 'Sell in May and Go Away' adage may not be a good strategy for Indian investors this year, as the markets approach May 2025 amid mixed global signals, geopolitical tensions with Pakistan, and an ongoing corporate earnings season.
While uncertainties around India-Pakistan relations following the Pahalgam terror attack have turned investors cautious, resilient domestic fundamentals such as stable GDP growth, in-line corporate earnings and revival in foreign inflows suggest that exiting equities may not be the best move.
In this backdrop, analysts believe that a selective and sector-specific approach will likely yield better results over the next few months.
Data shows that Sensex and Nifty returns during May have varied significantly over the past decade. While there have been instances of sharp declines, such as in May 2020 and 2022, positive returns during May 2014, 2016 and 2021 show that May is not always a month to exit the market.
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That said, experts suggest that fundamental drivers are much stronger this year compared to the periods when the adage might have worked.
The adage, Akshat Garg, assistant vice president at Choice Wealth, says is based on historical data suggesting stocks tend to underperform in the months from May to October compared to November to April. However, this pattern is not consistent across all indices or periods.
Garg suggests investors should follow a nuanced approach based on current market fundamentals and global economic conditions instead of blindly following the adage. "Staying invested with a focus on quality stocks, diversification, and monitoring key economic indicators is advisable," he added.
Echoing similar views, Aamardeo Singh, head of research at Angel One, said, "India's growth outlook remains steady, corporate earnings are resilient, and domestic liquidity continues to support the markets. Rather than exiting, investors should stay selective and focus on opportunities in sectors like financials, manufacturing, and domestic consumption plays."
The progress of the monsoon, corporate earnings momentum, rural demand trend, crude oil price movements and the impact of RBI's recent measures will be the key factors to watch in the coming months, analysts said.
The revival in foreign portfolio investor (FPI) inflows – if it sustains – will act as another booster for market sentiment. After witnessing significant FPI outflows earlier this year, FPIs have infused over ₹32,465 crore into Indian equities over the past eight trading sessions, signalling a revival in foreign investor confidence despite geopolitical tensions.
This renewed interest Saurabh Patwa, head of research and portfolio manager at Quest Investment Advisors said, is partly driven by India's favourable positioning amid global trade realignments and a weakening US dollar, both of which are enhancing the relative attractiveness of emerging markets like India.
However, Patwa also advises caution at the sector level. "The Indian IT services industry now faces twin headwinds including a potential slowdown in developed economies and structural disruption from artificial intelligence (AI) adoption. While valuations have corrected and offer selective opportunities. At the stock level, the ongoing Q4-FY25 earnings season will be a key driver of near-term market movements. So far, performance has been mixed as large private sector banks have reported better-than-expected results but consumer staples companies have delivered muted numbers," he said.
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