Introduction

The stock market adage, “Sell in May and go away,” is under scrutiny as the Indian stock market enters May following strong gains in the past two months. The benchmark index Sensex has surged nearly 9%, leaving investors to wonder: will this historical trend hold for the Indian market, or is a pullback in store? Analysts believe that while some pullbacks may occur, a major downtrend is unlikely in May.

Historical Trends: May Could Still Be Bullish for Nifty

Historically, May has been a favorable month for the Indian stock market. Data shows that the Nifty index has delivered positive returns in six out of the past ten years, with an average gain of 3.51% in positive years. Even during the four negative May months, the average decline was only -1.56%, making May historically favorable for investors.

Despite concerns like unresolved tariff disputes and geopolitical risks, the data suggests that the market could still experience moderate gains this May, continuing the trend of the past few years.

Market Analysis: Bullish Momentum, But Minor Pullbacks Expected

According to Ruchit Jain of Motilal Oswal Financial Services, while the market has seen strong upward movement in April, the trend is likely to continue with minor pullbacks. The recent correction near the 21,750-22,000 range might have been the start of a new uptrend, which could continue as long as the Nifty remains above key levels.

Kunal Kamble from Bonanza Group agrees, suggesting that while some profit booking may occur due to rising geopolitical risks and an overbought RSI, the overall trend will likely remain intact, with significant resistance at 25,000 and support around 23,500.

Geopolitical Risks: India-Pakistan Tensions and Global Trade Concerns

One of the major concerns for the Indian stock market in May is the potential escalation of tensions with neighboring Pakistan. While these geopolitical risks are real, analysts believe the market has already factored in the uncertainty and that a sudden major impact is unlikely in the short term.

Furthermore, ongoing trade negotiations with the U.S. and positive moves in tariff talks have contributed to a generally favorable outlook for India’s economic prospects. Foreign Institutional Investors (FIIs) have turned net buyers, infusing ₹4,223 crore in April, signaling growing confidence in the Indian market.

Investment Strategy: Buy on Dips

Experts largely recommend a buy-on-dips strategy for investors. With the Dollar Index and FII selling concerns now favorable, the outlook for the Indian market remains positive. As Jain of Motilal Oswal Financial Services points out, the dollar’s dip below the 100-mark and a stronger INR should support continued market growth in the medium term.

While geopolitical tensions remain a concern, analysts suggest that investors should view any short-term corrections as buying opportunities rather than a sign of a major market reversal. This approach allows investors to capitalize on dips while maintaining exposure to the long-term upward trend.

Analysts are largely recommending a buy-on-dips strategy as worries such as rising dollar, FII selling and trade tensions have ebbed.

“The factors that had led to correction in our markets, such as the rising Dollar Index and FII selling, have turned favourable for us. The Dollar Index is hovering below 100, FIIs have turned buyers in equities, and the USD INR has strengthened to around 84.50. This should result in a sustained upmove for our market in the medium term,” Jain of MOSL said.

The only concern is the geo-political tensions with the neighbouring country, Pakistan, and we do not know to what extent it will escalate. However, we believe markets would factor in that soon and thus, one should keep a buy-on-dip approach and use declines as buying opportunity, he added.

Conclusion: Stay Optimistic but Cautious

While the “Sell in May” adage may have historical relevance in some markets, the Indian stock market’s outlook for May remains largely positive. Analysts predict minor pullbacks, but overall, the trend is expected to remain bullish. Investors should continue to hold their positions, use dips as buying opportunities, and stay alert to any developments in geopolitical risks or global trade that could affect market sentiment.

Related: Nifty 50 Forecast: What Investors Should Know for 2025