Investors have been nervous lately on the back of political uncertainty ahead of elections, rising cude prices and weakening rupee. But if historical data is anything to go by, May could be a good month for the market.
Data shows Sensex rose in 7 instances in the month of May since 2008.
The S&P BSE Sensex jumped 20 percent in May 2009, followed by 8 percent rally in May 2014, and over 4 percent gain each in 2016 and 2017.
On the other hand, bears gripped the sentiment on Dalal Street in 4 instances since May 2008. The S&P BSE Sensex fell over 6 percent each in May 2008 and May 2012. (See chart)
April 2019 was subdued for investors as they remained on sidelines ahead of Lok Sabha election result on May 23. The muted performance is likely to continue in May as well, fear experts.
Although history suggests bulls have an upper hand but the verdict from experts remains fairly mixed. India VIX is trading at multi-year high and any disappointment on the political front could put the index in a tailspin.
“We’ve had a fairly positive view for the past few months. Going forward, our base case remains that a majority government will drive further upside. Post-election relief, optimism and confidence could drive markets higher, given the fair amount of domestic capital are on the sidelines,” Sunil Sharma, Chief Investment Officer, Sanctum Wealth Management said.
“Until clarity emerges, the safer path for fresh capital is to wait on the sidelines. Our preference remains tilted towards a diversified portfolio of short-term bond funds, high-quality corporate bond funds, and given expectations of further rate cuts by the RBI, a weightage to moderate duration funds,” he said.
Institutional activity:
Foreign institutional investors (FIIs) remained net sellers in May in five out of the last 10 years, according to data from AceEquity. They pulled out more than Rs 8,000 crore in 2010, followed by withdrawal of Rs 5,200 crore in 2011 and around Rs 5,000 crore just last year.
“FIIs have added over $8 billion YTD, coming out of an unfavourable year. We believe the FIIs are betting on the long-term India growth story. While we are not experts to predict elections, if there is a return of the current government, it would only act as a catalyst in front-loading some of these flows,” Nitin Rao, CEO, Reliance Wealth Management told Moneycontrol.
“Currently most of the FII flows into India have been a part of the emerging market (EM) focused funds and not necessarily in India focused ETFs alone. A stable administration at the Centre could see India focused ETFs also attract flows,” he said.
Domestic institutional investors, on the other hand, were mostly net buyers in Indian markets in May for the last 10 years. They were net buyers in eight instances in the last 10 years.
They poured in more than Rs 13,000 crore in 2018, followed by over Rs 9,000 crore buying in 2017 and more than Rs 7000 crore in 2016.
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