HOW WILL BE THE NIFTY & BANKNIFTY MOVE IN MAY 2022 ??

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May is here! Over the next few days, you’ll once again hear the well-known adage in the financial world: ‘Sell in May and Go Away.’Well, this time around, this adage is likely to get far more attention than it deserves because of the miserable performance of the equity markets across the globe.Markets are getting sold on every decent bounce. Furthermore, factors such as subdued Q4 corporate earnings, rising inflation, hawkish central banks, the resurgence of Covid cases in China, and high commodity prices are adding fuel to the fire.So, the million-dollar question now is: Should you follow the adage in 2022? To get a logical answer, we should look back into history and check the performance of markets in the month of May. Before moving on to the data-crunching part, let us first understand from where this ‘Sell in May and go away’ adage is said to have originated?

The Origin

interestingly, this saying has its roots not in Wall Street but in London's financial district. The original saying Sell in May and go away, come back on St Legers Day refers to a horse race. Yes, you heard right! The saying has its origins in a famous horse race! The St. Leger Stakes is one of England's most important horse races and takes place at the end of September. London traders would sell their shares, enjoy their summer and return to the market after the St Leger race. The idea is based on seasonality, and with this strategy traders are only invested in the stock market for about seven months of the year (October to April). Now that we know the history of the proverb, we can turn to data processing and dig deeper.

Nifty 50 Performance in May

As you can see in the 20-year chart above, Nifty50s performance for the month of May 11th was positive, so the data is skewed a bit in favor of the bulls. However, if we calculate the average return for the month of May, it's around 1.01% gain. So from this data, there isn't much evidence to support the advice that you should sell and walk away in May. On the contrary, if you review the numbers since 2013, we see that Nifty 50 has only delivered a negative return once between 2013 and 2021, and that was also in 2020.

Now let's look at the performance of Banknifty for the month of May from 2006 to 2021.

The average gain delivered by Bank Nifty is about 3.24%  in the month of May since 2006, with maximum gain seen in the year 2009 and the worst performance in 2020.More so, a similar trend is seen in Bank Nifty as well, as the index has given negative returns only once (in 2020) between 2014 and 2021.So, the data above clearly reflects that ‘Sell in May and go away’ might have proved to be a fruitful strategy in some cases, but not all the time.Hence, it is better not to rely solely on an adage based on a horse race and talk to your investment advisor about creating long-term investing strategies that will help you grow your money without having to rely on outside noise.