Did you notice? SBI Life Insurance, Shree Cement entered $10 bn club in 2019

The market rewards consistency, quality of management and earnings growth. SBI Life Insurance and Shree Cements which rose 17 percent and 19 percent in 2019, so far, entered the $10 billion club (market cap over Rs 69,000 crore).

As of June 11, 2019, as many as 42 stocks have a market capitalisation of over Rs 69,000 crore or $10 billion (Re/USD value 69). These include Godrej Consumer, Britannia Industries, Avenue Supermarts, Sun Pharma, IndusInd Bank, Titan Company, NTPC, Asia Paints, Coal India, Maruti Suzuki, ICICI Bank, Kotak, SBI among others.

Meanwhile, Tata Consultancy Services and Reliance Industries are the only two stocks in the elite $100 billion club (Mcap over Rs 6,90,000 crore).

Shree Cements and SBI Life entered the $10 billion club in 2019, while JSW Steel and Vedanta which were quoting a market capitalisation of over Rs 69000 crore on December 31, 2018, failed to sustain momentum and are out of the club.

While JSW Steel fell 11 percent, Vedanta saw a decline of 15 percent so far this year, which reduced the market capitalisation of both companies below Rs 69,000 crore, as of June 11.

Most brokerage firms remain positive on Shree Cement and SBI Life Insurance and investors who hold these stocks should stay put.

Nomura maintained its Neutral rating on Shree Cements with a target price of Rs 21,500. Volume growth remains healthy for the cement major and, at the same time, the costs are also easing which is a healthy sign.

The rally has been driven by expectations of cement price hikes. “We believe cement is in an upcycle, but we think cement price increase may remain slow, especially after the government’s recent criticism of rising cement prices,” said the note.

“Despite a 5 percent decline since this criticism, valuations at 6.4x FY21F core EBITDA and 33x FY21 P/E are expensive. Overall, we expect 11 percent YoY volume growth for Shree in FY20-21F,” said the note.

As for SBI Life Insurance, Kotak Securities retained its buy rating with a target price of Rs 800. SBI Life reported 14 percent growth in APE in 4QFY19, which was in line with 9MFY19 growth rate, though lower than 17 percent reported in 3QFY19.

Kotak Securities expects SBI Life to deliver 18 percent medium-term operating RoEV with 19 percent VNB (Value of new business) and 19 percent EVOP (Embedded value operating profit) CAGR during FY2019-22E.

The brokerage firm continues to build in high-teens growth and a moderate improvement in VNB margins to drive 18 percent operating RoEV. The brokerage firm also raised the fair value of SBI Life Insurance to Rs 800 from Rs 790 earlier.

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'Upside for Nifty capped at 12,000; deploy Call Butterfly Spread'

Nifty and Bank Nifty witnessed volatile swings on either side throughout last week. Nifty spot touched an intraday high of 12,000 and ended the week in red down 0.4 percent. Bank Nifty followed Nifty and was down about 1.45 percent on a week on week basis.

Bank Nifty weekly options data depicts the highest Put base at 30,000 that can act as possible support and highest Call OI is placed at 31,000, which can be immediate resistance.

Nifty Options data for the weekly expiry shows highest Put OI is placed at 11,800, which can act as vital support while on the upside, aggressive call writing of around ~21.89 lakh shares is seen at 11,900/12,000 which can act as immediate resistance.

Over the week, India VIX was down 120 basis point to end at 13.66 indicating low volatility in the market. Meanwhile, Nifty PCR open interest (OI) increased 6 basis point to 1.4682 suggesting positive sentiment in the market.

On a week-on-week basis, OI activity was not too emphatic to signify any alteration to original long-long Unwinding Structure, with heavy PE OI at 11,800 that could act as possible support.

The upside remains capped by aggressive call writing of around ~21.89 lakh at 11,900-12,000.

Moderately bullish strategy Call Butterfly Spread is suggested for this week. Call Butterfly Spread is bullish to rangebound strategy that offers decent risk-to-reward ratio for traders at a low cost.

In this strategy, we need to buy 1 ATM Call, Sell 2 OTM Calls near target level and Buy 1 further OTM call to hedge the risk.

The maximum profit in this strategy is at Call written strike. As theta decay is fast in weekly options, it is idle for deploying Call Butterfly Spread.

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Historical data for last 11 yrs suggests June belongs to bulls; will it be different in 2019?

Sensex and Nifty started the sixth month of the calendar year breaking records. Both benchmark indices created new record highs on the very first trading session in June—Sensex hitting 40,312.07 while Nifty climbing to 12,103.05 intraday on June 3.

Historically, bulls have controlled the D-Street in the last six out of eleven years, data from AceEquity showed.

Of those six instances, Sensex jumped 9 percent in June 2011, 6 percent in June 2009 and nearly 3 percent in June 2013—three of the biggest gains in June.

On the other hand, bears have dominated the market on five instances in June. Four of those instances are—2008 (Sensex down 2 percent), 2012 (Sensex down 1.09 percent) and 2016 and 2017 (Sensex down 0.7 percent each).

Benchmark indices have rallied about 10 percent so far in 2019. They have registered most of the gains in May post Lok Sabha election results as a stable government at the Center raised hopes of continuity of reforms.

Apart from political stability, fall in crude oil prices, a possible rate cut from the Reserve Bank of India (RBI) and expectation of near-normal monsoon fuelled the rally.

“Firstly, the investors would keep a close watch on the upcoming RBI monetary policy scheduled on June 6. After a thumping victory by the NDA government, the hopes amongst participants have definitely increased for a rate cut in the upcoming policy meeting,” Jayant Manglik, President, Retail Distribution, Religare Broking Ltd told Moneycontrol.

“Further, the progress of monsoon would also be crucial for the markets as any major deficit would hurt the already muted consumption demand in the Indian economy. Additionally, the focus would shift back to global cues, which has been volatile due to US-China trade war and political uncertainty in the UK,” he said.

Although history suggests bulls have an upper hand but the verdict from experts remains fairly mixed. Given the market is trading near record highs, there is a possibility of some profit booking at higher levels.

“June might not turn out to be as hot and fiery as the mood is now and if looked at the current scenario in depth, fresh highs are not supported by enough fire. The volumes are average, FIIs and DIIs have been net neutral amongst themselves and on top of that there are no significant fresh inflows from the domestic investors; SIP inflows are nonetheless stable,” Umesh Mehta, Head of Research at SAMCO Securities, told Moneycontrol.

“These are no conditions for a genuine breakout and therefore this could turn out to be a mirage. Traders might end up buying at the intermittent top and therefore it is time to remain cautious,” he said.

Nifty has already rallied above 12,100 in June but any meaningful upside from current levels remains fairly capped.

“Rollovers towards June series do suggest that we may be entering a short term trending period. It is a matter of time that we may see some trend developing. 11,800-12,200 is seen as a range for now on the basis of derivatives data,” Mustafa Nadeem, CEO at Epic Research, told Moneycontrol.

“The Nifty, in June, could oscillate in the range of 11,800-12,200 on the upside. Above 12,200, we may see further trend continuation but we should be a bit conservative here,” he said.

Institutional activity:

Foreign institutional investors (FIIs) have been net buyers in June in seven out of the last 10 years, according to data from AceEquity.

In the rest of the instances, they pulled out more than Rs 9,000 crore in 2013, Rs 5,000 crore in 2015 and around Rs 2,000 crore just last year.

DIIs were also mostly net buyers in June in seven out of the last 10 years. They poured in more than Rs 10,000 crore in 2015, Rs 9199 crore in 2017 and Rs 6000 crore just last year.

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Market Headstart: Nifty likely to open lower; 3 stocks which could give 8-13% return

The Nifty50 is likely to open lower on Tuesday ahead of Monetary Policy Committee (MPC) outcome on Thursday. Asian markets were trading mixed as deeper concerns about growth have capped broader improvements in risk sentiment.

Trends on SGX Nifty indicate a negative opening for the broader index in India, a fall of 48 points or 0.40 percent. Nifty futures were trading around 12,070-level on the Singaporean Exchange.

Overnight, the three major U.S. stock indexes declined on Monday and Nasdaq confirmed it was in a correction, dragged down by Alphabet, Facebook and Amazon.com on fears the companies are the targets of U.S. government antitrust regulators, said a Reuters report.

The S&P BSE Sensex rose 553 points to 40,267 while the Nifty50 closed 165 points up at 12088 on Monday to end at fresh record closing high.

The Indian rupee June 3 appreciated by another 44 paise to close at 69.26 to the US dollar in line with an intense rally in domestic equities amid hopes of a rate cut by the Reserve Bank.

Stocks in news:

L&T Technology Services: Promoter L&T to sell up to 4 million shares of company via offer for sale on June 4 and 5, floor price set at Rs 1,650 per share.

GE Power India: Company received order worth Rs 738 crore.

Wipro: Company has fixed June 21 as the record date for the purpose of determining the entitlement and the names of equity shareholders who are eligible to participate in the buyback.

Technical Recommendations:

We spoke to YES Securities and here’s what they have to recommend:

Voltas Limited: Buy| Target: Rs 665| Stop Loss: Rs 565| Upside 13%

Avenue Supermarts Ltd: Buy| Target: Rs 1450| Stop Loss: Rs 1300| Upside 8%

Aditya Birla Capital Ltd: Buy| Target: Rs 115| Stop Loss: Rs 98| Upside 13%

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Top buy and sell ideas by Sudarshan Sukhani, Rajat Bose, Prakash Gaba for short term

The market reversed all its previous day gains and ended F&O expiry session at record closing high on May 30, driven by index heavyweights HDFC Twins and Reliance Industries ahead of Modi 2.0 government formation and Q4 GDP data due later in the day.

The BSE Sensex rallied 329.92 points to 39,831.97 while the Nifty 50 climbed 84.80 points to 11,945.90, forming a bullish candle on daily charts. The index gained 2.6 percent in May series.

The broader markets also participated in the rally. The Nifty Midcap index gained 0.8 percent and Smallcap index rose 0.4 percent.

According to the Pivot charts, the key support level is placed at 11,880.7, followed by 11,815.5. If the index starts moving upward, key resistance levels to watch out are 11,989.8 and 12,033.7.

The Nifty Bank index closed at 31,537.10, up 241.55 points on May 30. The important Pivot level, which will act as crucial support for the index, is placed at 31,309.07, followed by 31,081.03. On the upside, key resistance levels are placed at 31,692.17, followed by 31,847.23.

In an interview to CNBC-TV18, top market experts recommend which stocks to bet on for good returns:

Sudarshan Sukhani of s2analytics.com

Buy UltraTech Cement with stop loss at Rs 4730 and target of Rs 4810

Buy Manappuram Finance with stop loss at Rs 135.5 and target of Rs 138.5

Sell CG Power with stop loss at Rs 37.2 and target of Rs 35.5

Buy ICICI Bank with stop loss at Rs 423 and target of Rs 434

Buy DCB Bank with stop loss at Rs 232 and target of Rs 239

Rajat Bose of rajatkbose.com

Buy Bharat Electronics with stop loss below Rs 111.25 for target of Rs 117.75

Buy DLF with stop loss  below Rs 191.75 for target of Rs 199

Buy Siemens with stop loss below Rs 1285 for target of Rs 1330

Prakash Gaba of prakashgaba.com

Buy Bajaj Finance with target at Rs 3600 and stop loss at Rs 3430

Buy Indraprastha Gas with target at Rs 350 and stop loss at Rs 331

Sell Godfrey Philips with target at Rs 900 and stop loss at Rs 975

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Market Headstart: Nifty likely to open higher; TCS remains top buy from IT space

The Nifty50 is likely to open the first day of June series on a positive note on Friday even as most of the Asian markets were trading mixed.

Asian markets were trading mostly lower as investors feared U.S. President Donald Trump’s shock move to slap tariffs on Mexico risked tipping the United States, and maybe the whole world, into recession, said a Reuters note.

Trends on SGX Nifty indicate a flat to positive opening for the broader index in India, gains of 22 points or 0.19 percent. The Nifty futures were trading around 11,998-level on the Singaporean Exchange.

The rupee May 30 fell marginally by 4 paise to close at 69.87 against the US currency, extending its decline for a third straight day, due to a stronger dollar and investors awaiting the allocation of key portfolios in the newly elected government.

On the institutional front, FPIs were net buyers in Indian markets for Rs 1664 crore while the DIIs were net sellers to the tune of Rs 1122 crore, provisional data showed.

Stocks in news:

Mining major Coal India Ltd May 30 reported a consolidated net profit of Rs 6024.23 crore for the fourth quarter ended March 2019, a jump of 362 per cent over Rs 1302.63 crore, the post-tax profit of the corresponding period last year.

Hospitality major EIH, which runs hotels and resorts under Oberoi and Trident brands, May 30 reported a 77.25 per cent decline in standalone net profit to Rs 12.77 crore for the quarter ended March 2019 due to an exceptional item.

GMR Infrastructure suffered a loss of Rs 2,341.25 crore on a consolidated basis in the March 2019 quarter, owing to impairment losses of some of the power assets, the airport-to-energy conglomerate said in a filing with bourses Thursday.

Technical Recommendations:

We spoke to IIFL and here’s what they have to recommend:

TCS: Buy| Target: Rs 2253| Stop Loss: Rs 2093| Upside 5%

Bajaj Finserv: Buy| Target: Rs 8638| Stop Loss: Rs 8026| Upside 5%

HDFC Life: Buy| Target: Rs 461| Stop Loss: Rs 422| Upside 6%

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Manpasand Beverages plummets 10% on denial of bail to top brass

Shares of Manpasand Beverages plummeted 10 percent intraday on May 30, hitting another 52-week low, after the officials of the company arrested for GST fraud were reportedly denied bail.

According to CNBC-TV18 sources, the company's Managing Director Abhishek Singh, his brother Harshvardhan Singh and the Chief Financial Officer Paresh Thakkar, who were arrested following a raid by the CGST Commissionerate Vadodara-II sleuths on May 23, have been denied bail.

On May 23, the CGST Commissionerate conducted multi-locational searches across various premises of Manpasand Beverages.

"The raids unveiled a huge racket of creating fake units for availing fraudulent credit and committing tax evasion of Rs 40 crore and involving turnover of Rs 300 crore approximately," said the CGST statement.

Following the expose, at least five of the eight directors resigned with immediate effect from the company's Board citing the GST crackdown on the company's top brass as the primary reason for their exits.

The share price of Manpasand has tanked 48 percent on the BSE since the top management was arrested. At 0955 hours, Manpasand Beverages was quoting Rs 57.10, down 9.94 percent on the BSE.

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GNFC tanks 6% on dismal Q4 numbers

Shares of Gujarat Narmada Valley Fertilizers & Chemicals tanked nearly 6 percent intraday on May 30 after the company reported a 71.6 percent decline in profit for the quarter ended March 2019.

The company in its exchange release said profit for Jan-March quarter stood at Rs 93.6 crore, compared to Rs 329 crore in the year-ago period.

Revenue slumped 18.9 percent at Rs 1,430.9 crore, against Rs 1,764.4 crore in the corresponding quarter of the previous fiscal.

The board of the company recommended a dividend of Rs 7 per equity share of Rs 10 each.

At 0928 hours, GNFC was quoting Rs 290.85, down 5.68 percent on the BSE.

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BJP fares well in 'minority-concentration' districts, wins over 50% seats

The BJP has managed to puncture opposition's claims that the party is anti-minority by winning more than 50 per cent of the Lok Sabha seats in 90 'minority-concentration' districts identified in 2008 by the then UPA government.

Besides a considerable minority population, these districts have both socio-economic and basic amenities indicators below the national average.

Of the 79 such constituencies, the BJP has won the maximum of 41 seats, a gain of seven over 2014. The Congress's share has almost halved, down from 12 in 2014 to six now.

An analyst claimed that Muslims did not vote en bloc in favour of one party or candidate this time.

On the other hand, 27 Muslim candidates won in the recently-concluded elections. However, none of the six Muslim candidates fielded by the BJP tasted success.

The winning MPs are from Trinamool Congress (5); Congress (4); Samajwadi Party, Bahujan Samaj Party (BSP), National Conference and Indian Union Muslim League (IUML) (3 each); AIMIM (2); LJP, NCP, CPI(M) and AIUDF (one each).

The Opposition parties have been accusing the BJP of not doing enough for the minorities and also aiding and abetting attacks on them.

Nearly 20 percent of the country's 130 crore people are Muslims.

In the minority-concentration districts, the BJP gained the most in West Bengal, which has 18 such seats. In Raiganj in Uttar Dinajpur district which has a Muslim population of nearly 49 percent, BJP's Debasree Chaudhuri defeated TMC's Agarwal Kanaialal by 60574 votes.

In neighbouring Jalpaiguri seat, BJP candidate Jayanta Kumar Roy defeated sitting TMC MP Bijoy Chandra Barman by 184004 votes. The seat has about 20 percent Muslim population.

In Maldaha North seat in Malda, the party's Khagen Murmu won defeating TMC's Mausam Noor by a margin of 84288 votes. The seat has nearly 50 percent Muslim population.

In Coochbehar seat which has a Muslim population of around 30 percent, BJP's Nisith Pramanik got the better of his nearest rival TMC's Paresh Chandra Adhikary by 54231 votes.

In Balurghat in North Dinajpur district, BJP candidate Sukanta Majumdar defeated TMC's Arpita Ghosh by a margin of 33293 votes. The seat has 35 percent Muslim population.

In Bishnupur Lok Sabha seat (20 percent) in Bankura, BJP candidate Saumitra Khan won by 78047 votes defeating his Trinamool Congress rival Shyamal Santra.

In Hooghly seat (20 percent), Locket Chatterjee of the BJP defeated his TMC rival Ratna Dey (Nag) by a margin of 73362 votes while S S Ahluwalia of BJP won the Burdwan-Durgapur seat by a slender margin of 2439 votes defeating his nearest AITC rival Mamtaz Sanghamita. The seat has around 15 percent Muslim population.

The UPA government in 2008 had identified the 90 minority-concentration districts under a development programme that focussed on education, health and skill development in these districts.

Rampur, Nagina, Moradabad, Sambhal and Amroha are among the 20 Lok Sabha seats in Uttar Pradesh where Muslim voters are in a very large number.

Though the BJP performed well in the state, ensuring that the SP-BSP-RLD combine does not get a cake walk, the 'mahagathbandhan' bagged these five seats.

In Rampur, where Muslims account for nearly 50 percent of the voters, veteran SP leader Azam Khan defeated BJP candidate and actor-turned-politician Jaya Prada by over one lakh votes.

The BSP won the Nagina seat when its candidate Girish Chandra defeated sitting BJP MP Yashwant Singh by over 1.66 lakh votes.

In Moradabad, ST Hasan of the SP defeated sitting BJP MP Kunwar Sarvesh Kumar by nearly 99,000 votes.

Another SP candidate, SR Barq defeated Parmeshwar Lal Saini of BJP in Sambhal seat.

In Amroha, Kunwar Danish Ali, who had defected from the Janata Dal (Secular) and had joined the BSP just ahead of the polls, emerged victorious trouncing sitting BJP MP Kunwar Singh Tanwar.

The Congress had fielded six Muslim candidates in Uttar Pradesh, but none of them won.

In the entire state, Muslims account for nearly 20 percent of the population.

In the 2014 Lok Sabha polls, not a single Muslim candidate won and the jinx was broken only during Kairana bypoll when the seat was wrested from the BJP by Tabassum Hassan, the joint opposition candidate, who had contested on RLD ticket. In Bihar, there are seven such seats, and in Kishanganj, which has around 65 percent Muslim population, Congress's Mohd Javed defeated JD(U)'s Syed Mahmood Ashraf by 34,466 votes.

In Araria (45 percent), BJP's Pradip Kumar Singh defeated sitting RJD MP Sarfaraz Alam by 1,37,241 votes while in Katihar (40 percent) Congress's Tariq Anwar (sitting MP, who won the seat on an NCP ticket) lost to Dulal Chandra Goswami of the JD(U) by 57,203 votes.

Darbhanga, having a Muslim population of about 23 percent, saw BJP's Gopal Jee Thakur defeating RJD's Abdul Bari Siddiqui by 2,67,979 votes.

In Khagaria (23 percent), sitting Lok Janshakti Party MP Mehboob Ali Kaisar defeated Mukesh Sahni of VIP by 2,48,570 votes, while in Banka (20 percent) JD(U)'s Giridhari Yadav prevailed over sitting RJD MP Jai Prakash Narain Yadav by 2,00,532 votes and in Madhubani (19 percent), BJP's Ashok Yadav defeated VIP's Badri Purbe by 4,54,940 votes.

In Assam, the Congress won two of the seats where there is a sizeable Muslim population -- Abdul Khaleque in Barpeta (over 45 percent) and Pradyut Bordoloi in Nowgong (over 34 percent). AIUDF chief Badruddin Ajmal emerged winner in Dhubri, where the Muslim population is over 65 percent.

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'Sustained trade above 11,950 can take Nifty beyond 12K'

Nifty closed at a record closing high on May 28 above 11,900. It witnessed selling pressure around 11,950 for the second day in a row and now a sustained trade above 11,950 can take the index higher to levels of 12,060-12,120.

On the flip side, a trade below 11,850 may trigger profit booking dragging the index towards 11,810-11,740. The Relative Strength Index (RSI) on the daily time frame suggests that the bullishness remains intact and the rally has more legs on the upside.

Here are three stocks that could give 7-15 percent return in the next 3-4 weeks:

Vedanta: Buy| LTP: Rs 169| Target: Rs 181| Stop loss: Rs 160| Upside: 7 percent

On the daily chart, Vedanta is on the verge of a breakout from a Triangle pattern neckline placed at Rs 168. A sustained trade beyond this neckline backed by healthy volumes can take the stock higher to Rs 176-181.

Moreover, it had taken support at the 78.6 percent Fibonacci retracement level in the recent correction and turned higher indicating that the bulls are actively buying at the support area to push the stock higher.

The RSI has also turned north after taking support at the 40-level forming a higher low. The stock may be bought in the range of Rs 165-167 for targets of 176-181, keeping a stop loss above 160.

Shankara Building Products: Buy| LTP: Rs 521| Target: Rs 600| Stop loss: Rs 520| Upside: 15 percent

On the daily chart, Shankara Building Products has broken out from an Ascending Triangle triggering bullish trend in the stock.

Further, the breakout was backed by high volumes confirming the strength in the breakout. The RSI has also turned higher after making a positive divergence suggesting higher levels.

The stock may be bought in the range of Rs 560-565 for targets of Rs 600-635, keeping a stop loss below 520.

Nestle India: Buy| LTP: Rs 11,147| Target: Rs 11,850| Stop loss: Rs 10,600| Upside: 11 percent

On the daily chart, Nestle India is approaching the upper end of the Ascending Triangle pattern placed at Rs 11,190. A sustained trade beyond this neckline can take the stock higher to Rs 11,600.

On the weekly time frame, it has turned upwards after taking support at the 61.8 percent Fibonacci retracement confirming that the bullishness is intact in the stock.

Further, RSI has turned north after taking support at the 40-level suggesting that there are more legs to this rally following the bullish breakout. The stock may be bought in the range of Rs 11,000-11,050 for targets of Rs 11,500-11,850, keeping a stop loss above Rs 10,600.

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'If Nifty crosses 11,860, it can hit 12,300 without any major difficulty'

In the previous week, there was a big tussle between bulls and bears in the broader range of 11,300-11,130, which continued till Thursday. However, on the last trading day of the week, Nifty managed to break the range and closed above 11,400, which is grossly positive for the market.

By closing above 11,400, it suggests that the market has stabilised and is ready to move further higher to retrace recent losses.

Above 11,400, it would move to minimum 11,500-11,550, which is a major hurdle for the market. A close above 11,570 on May 20 or May 21 would lift indices to 11,700.

Technically, crossing 11,860 would matter a lot for the stock market as it would shift the base for the market to 11,100 from 10,600.

Whenever Nifty has shifted its bottom, it has added approximately 2,000 points to the base level, which is at 11,100. This has been proven times since December 2011. Readers should go through with the following statistics of Nifty.

If we go through with the above data points, then Nifty could climb to a minimum of 12,900 and maximum of 13,700 in the next one to two years with ups and downs but without breaching the previous bottom, which would be at 11,100. But, for that, Nifty should break 11,860 on a monthly closing basis.

In case Nifty fails to break 11,860 and breaks 11,100 downwards, then in the worst case scenario, we could see 10,300 or 10,100 on the lower side.

In brief, we can expect a minimum 11,550 and 11,700 in best case scenario. The strategy should be to reduce weak long positions between 11,550 and 11,700, as we witnessed maximum distribution in the range of 11,550-11,750.

Fresh buying is advisable if Nifty crosses 11,860. Above 11,860, Nifty could even hit 12,100 or 12,300 without any major difficulties.

A close below 11,100 would be negative for the market. The focus should be on largecap companies, which are part of the index.

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Sell in May and go away: Analysts say volatility is here to stay

Sell in May and go away—the famous financial-world adage might just hold true for Indian markets this year if we go by analysts expectations.

The phrase is based on the historical underperformance of some stocks in the "summery" six-month period commencing in May and ending in October, compared to the "wintery" six-month period from November to April, according to Investopedia.

If a trader or investor follows the sell-in-May-and-go-away strategy, we could see some selling from May to October, and buying in the period starting November to April.

Though in the last five years, this phenomenon has come true for Indian markets only in 2018 when Sensex gave a negative return of 2 percent in the period starting May to October and gave positive returns of over 13 percent in the next six months, AceEquity data showed.

“The given motto does not exist, at least in Indian markets. However, this time it seems likely that this could be a wise strategy as the outcome of a stable government post-election might have been discounted,” Mehul Kothari, Sr. Technical Analyst, IndiaNivesh Securities Limited told Moneycontrol.

For 2019, there are multiple headwinds to deal with that could push the markets lower. After hitting a record high of 11,856 last month, persistent selling by foreign investors, uncertainty around elections, weak corporate results, the slowdown in the economy and trade tensions globally will keep traders on the edge, according to experts.

“Thus, it augurs well with our view that traders should start booking their profits at higher levels and sit on cash,” Kothari adds.

Indian bourses also became vulnerable to the US-China trade spat that has spooked global markets. Incidentally, foreign investors have pulled out more than Rs 3,000 crore from Indian markets so far in May.

Any adverse outcome from US-China trade talks could put pressure on the rupee which is seeing consistent depreciation. Any depreciation in the yuan will further put pressure on the rupee as the dollar keeps gaining strength amid the tussle.

Given weaknesses in global macros and an uncertain political situation in India due to elections, market participants are wary of taking any major positions, suggest experts.

Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote advised that amid the uncertainties investors must form an independent view of their own and not blindly follow third-party opinions.

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