The popular stock market adage “sell in May and go away” might be proved wrong this year as a slew of positive indicators including better January-March corporate earnings and foreign fund flows could make investors stick to stocks,say experts.
Since last three years,markets have seen selling in the month of May,but market analysts hope that the same may not happen this time.
“Earnings have been good so far,rate cut might be on the expected lines on May 3 policy and FIIs are also putting in money in Indian stocks,all these are positive indicators for the markets in near term. Only if political issues take an ugly turn,markets might see a correction,” said Gaurang Shah,Assistant VP at Geojit BNP Paribas Financial Services.
Another analyst,Paras Bothra,Research Head at Ashika Stock Brokers said,”Selling may not happen in May this year like previous years as before a market tanks one needs to see a huge run-up in the equities. Also,global markets are on a strong foothold.”
The BSE benchmark Sensex had tumbled 6.26 per cent in May last year,while in 2011,the index lost 2.6 per cent and in 2010,it fell 2.53 per cent.
The 30-share Sensex had gained 3.4 per cent last month.
In the previous years as well,May has been mostly bad for the stock markets globally,but the Indian markets had seen mostly alternate gains and losses during May till 2009.
The “sell in May and go away” strategy is 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.
Markets are hopeful that Reserve Bank may cut repo rate and Cash Reserve Ratio (CRR) by about 0.25 per cent each to spur demand and boost industrial output.
The possibility of a rate cut at the annual credit policy to be unveiled on May 3 has gone up with inflation falling to 5.96 per cent level,the lowest in three years.
Besides,overseas investors have poured in over USD 11 billion in 2013 so far.