“Sell in May and Go Away”? Why the NIFTY50’s Record Suggests Staying the Course

Mumbai, 6th May – The stock market adage “Sell in May and go away” has for a long time influenced investment strategy in financial centers such as Wall Street and the City of London. This phrase, rooted in historical trends of summer slowdowns, spring dividend payouts, and lower liquidity, advises investors to exit equities in May and return in November. But does this advice hold true for India’s rapidly developing equity markets?

A closer look at the NIFTY50’s historical performance over the last ten years suggests that Indian investors might do well to ignore this seasonal wisdom entirely.

Note: May 2025 data is not yet available as the month is still in progress.

A Decade of May Performance: NIFTY50 Shows Resilience

Between 2015 and 2024, the NIFTY50 mostly delivered positive or flat returns during May:

• Positive May Returns in 6 of 10 Years: The index posted gains in May in 2015, 2016, 2017, 2018, 2021, and 2023.
• Flat or Negative in 4 Years: May returns were flat in 2019 and turned negative in 2020, 2022, and 2024.
• Strong April Often Followed by Softer May: Years like 2018 (+6.2%) and 2020 (+14.7%) witnessed robust April gains, followed by weaker or negative May returns—possibly due to profit-booking after strong rallies.

NIFTY50 for 2025: A Trend Reversal in Progress

On the weekly chart, the NIFTY50 formed a lower-top, lower-bottom pattern until early April. A bullish breakout in mid-April, though, had the index crossing the erstwhile swing high of 23,870, indicating a trend reversal. More importantly, the Relative Strength Index (RSI) also saw a positive divergence, with the index forming a lower low but the RSI forming a higher low—typically a harbinger of a trend change.

By the last week of April, the index encountered resistance around 24,550, which is a very important level pegged by the 61.8% Fibonacci retracement line from the April low to all-time high. The inability to breach this barrier has resulted in some profit-taking.

What to Watch for in May 2025:

May 2025 will be shaped by several macroeconomic and policy events that can affect Nifty50:
1. India’s Q4 FY24 GDP release: Expected in late May, this report will provide insight into the growth momentum of the Indian economy.
2. CPI Inflation Data: A higher-than-expected inflation rate may trigger fears regarding possible interest rate hikes or influence bond yields.
3. US Federal Reserve Outlook: Any interest rate change cues from the Fed can have an impact on overall global market sentiment.
4. Election Frenzy and State Policy: With elections being held in many states, investor sentiment might also be shaped by political developments.

The Bottom Line: Caution, Not Capitulation
The past history of the NIFTY50 indicates that the “Sell in May” mantra is not of much relevance for Indian markets. But care needs to be exercised after high-rally moves like the one observed in April 2025. With the NIFTY50 now confronting a make-or-break test at 24,550, the next few weeks will be instrumental in ascertaining if the upward momentum can continue.