Sensex cracks 1,460 pts from day's high, Nifty off record levels. Should you sell in May and go away?

Sensex, Nifty today: Benchmark stock indices took U-turn in Friday's trade, falling over 2 per cent from day's high, baffling investors. The selloff was so broad-based that two of every three stocks on BSE were trading in the red and nearly 247 exchange-listed stocks had hit their respective lower circuits, with investors losing Rs 3.21 lakh crore, as suggested by the fall in the BSE market capitalisation.

Sensex fell from day's high of 75,095.18 to a low of 73,637.38, down 1,457.80 points. Nifty, which hit a fresh record high of 22,794.70 today, was last quoting at 22,416.50, down 1,02 per cent. The fall was seen even as recent corporate earnings were good and GDP growth figures were healthy. The decline in dollar index to 105.30, correction in the US 10-year bond yield to 4.5 per cent and  fall in Brent crude below $84  a barrel level were all positives.

That made a few investors recall an old adage that suggests "Sell in May and go away".  But should investors sell stocks in the middle of Lok Sabha elections 2024? 

“Sell in May and go away” does not hold good, said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
 
The market, Vijayakumar said, has already discounted the NDA/BJP win in the ongoing general elections and that the outcome is unlikely to influence the market beyond a point. 

He felt the market is likely to react to the Budget, which the Prime Minister has already indicated will be ‘transformational’. 

"Investors may adopt a multi-asset investment strategy, going forward, with investment in equity, fixed income and gold. The highest weightage should certainly be for equity."

Sunil Damania, Chief Investment Officer, MojoPMS said: "The adage "Sell in May and Go Away" originated from the practices of British brokers on the London Stock Exchange, who historically took extended summer vacations. However, contemporary market dynamics have rendered this notion obsolete, as trading activity remains robust year-round with no significant impact on volume or liquidity during the summer months."

Damania said market trends over the past decade reveals a pattern of positive returns in nine out of ten instances for the three-month period ending in July. 

"This suggests that holding investments from April to July typically yields favourable results, with the sole exception occurring in 2019, coinciding with an election year. Given the current electoral landscape, there exists a likelihood of profit booking in anticipation of market shifts," he said.

Presently, market sentiment reflects confidence in the Modi government's continuity, with positive expectations already factored into pricing, Damani said.

"While the short-term outlook may appear subdued, our assessment of the equity market for the medium to long term is notably bullish. We maintain a strong conviction that the Indian equity market is poised for significant growth, potentially doubling from the current election cycle to the subsequent one," he said.