Will 'sell in May and go away' be a good idea for investors this year?

Mumbai: After the 6% surge in the Nifty in April, investors are asking whether the oft-repeated adage ‘Sell In May And Go Away‘ will play out this year. With the failure of US-based First Republic Bank – and its bailout by JPMorgan Chase – coupled with the meeting of the US Federal Reserve’s rate-setting panel later this week expected to increase uncertainty, there are concerns if the market has enough legs to sustain the recent rally. In the event of a sell-off, analysts are recommending clients to load up on their favourite stocks.

As most Asian markets including India’s were closed on Monday for Labour Day, Tuesday would be the first trading day of the month. The ‘Sell in May and Go Away’ maxim refers to past instances of the market remaining weak between May and October. However, in recent years, the month of May has seen the market advancing more than declining. Since 2000, the Nifty has advanced 14 out of the 23 times in May. Analysts said the market moves during the month in the past 23 years suggest there are flaws to this approach.

“The ‘Sell in May’ phenomenon has not worked lately and it appears as though the summer seasonality has shifted in recent years,” said Siddharth Bhamre, head of research, Religare Broking.

But market participants are unwilling to dismiss this theory because of the continued turmoil in the US financial system. First Republic Bank is the third large US lender to fail since March. Though JPMorgan Chase will buy out First Republic Bank in a takeover arranged by the US regulators, the failure has raised fresh questions about the health of the financial system of the world’s largest economy. Amid the crisis, the US Federal Reserve on Wednesday is likely to continue raising interest rates to push pack stubborn inflation.