After A Strong April, Will Markets Still Play By ‘Sell In May And Go Away’ Strategy

After logging one of the best monthly rallies in April, Indian equities enter May at an interesting crossroads. With crude oil prices elevated and the US-Iran conflict still far from over, talks around the old and famous Wall Street adage "Sell in May and go away" have resurfaced. The question now is whether this seasonal strategy still holds relevance in the current scenario.

To answer that, let's first understand the thinking behind this adage. During the May-October period, trading activity tends to slow, particularly in developed markets due to summer holidays, leading to lower participation from institutional investors. This period also doesn’t offer many strong domestic triggers to keep momentum going. On the other hand, the November–April period sees stronger tailwinds from festive demand, robust earnings, Budget-related developments and fresh portfolio allocations by global funds.

Historical data cited by Reuters in one of its reports show that equities have generally delivered weaker returns during the May–October phase, averaging around 2 per cent since 1945, compared to nearly 7 per cent gains during the November-April period. However, more recent trends suggest the pattern may be losing relevance.

In the last ten years, returns during this so-called weak phase have improved significantly, averaging around 7 per cent, including a sharp 22 per cent rally last year, indicating that timing the market based on seasonality may not be as effective anymore.