Over the course of the years, the index has seen cyclical lows in the month of May. This prompted the birth of the saying ‘Sell in May and go away’. However, an ICICIdirect report examined the performance of the Nifty 50 index over the past two decades to determine if the statement holds true in an Indian context and what investors should do this May.
Contrary to popular belief, in India, the month of May has given buyers a good opportunity. According to the table below, 83% of the time, the index has provided positive returns when calculated from May lows to the year-end. Therefore, investors should maximize their returns by buying into dips and excess volatility.
There are various factors contributing to the rapid rise and subsequent hike of the index. As the rally garnered momentum, while the participation of outperforming sectors contributed to the gains, sectors that were laggards over the past year and a half, such as pharmaceuticals, realty and chemicals, also participated in the index’s up move. As a result of broadening sector participation, ICICIdirect believes that the rally ahead will be a more sustainable one.
Outlook on Midcaps
Moving concurrently with Nifty 50, Nifty Midcap 100 also snapped a four month long corrective phase, witnessing a channel breakout. This indicates the index will resume an up move over the course of May. While sectoral participation broadly helped the benchmark index, Nifty 50, surge in April, the brokerage recommended to remain stock specific in the midcap sector.
Bank Nifty outlook
The banking stocks index, Bank Nifty, gained for a second month and outperformed Nifty 50. As a result of its rally, it retraced about 80% of its decline from December ‘22 to March ‘23. The price structure of the index remains positive, said the brokerage, expecting Bank Nifty to resolve the resistance of 43,200 and head towards the lifetime high of 44,150. However, along similar lines of Nifty 50, ICICIdirect believes this will not happen in a linear fashion and all dips should be treated as buying opportunities.