“Sell in may and go away”, an adage that exists in stock market. It is believed that stock markets will start experiencing a decline in May. It is being a usual practice globally to see the stock by may. What does the term “go away” convey? Decline of market will start in may and go up to October as per belief. So, adage conveys a message to go away and come back by November.
Beyond mentioning the adage to be a belief, it can be told as historical experience. Adage is not just words for any reason, always adage holds an experience behind it. Even the above adage holds an experience, not just experience rather strong evidence. Research done by Forbes conveyed that an investment of $10,000 was made for past 64 years in November – April period multiplied to $816,984 but the same investment in the period of May – October resulted in a loss of $221.
The above results by forbes is supported by a informal fact followed in abroad that month of May is preferred for summer vacations, so people start enjoying life by liquidating stocks and will return back to normal by September. This may lead to a seasonal decline in May – October and a boosted investment in November – April, though exact reasons are not known.
Even in India this adage has got life, though not every year. Since 1993, 11 times India has faced a decline in May. As an overall average since 1994 may – October has delivered 5% and November – April has delivered 9% positive performance. Even in terms of volumes, November – April used to always hit the rock than May – October.
Indian market has faced a decline of 16% and 14% in May 2004 and 2006 respectively. Though in May 2009 a jump of 28% has been experienced due to elections had resulted with UPA government as a chance again. Similarly in May 2014, a jump of 8% has been experienced due to elections that paved way for Modi’s government.
To talk about this May (i.e) May 2015 – decline in corporate profits, increasing oil prices, increase in petrol/ diesel rates, fear of US Federal reserve rate hike in June and dropping S & P BSE sensex , interest rate reduction and successful one year completion of Modi’s government are major factors that may drive investments for a couple of days. Declining sensex may be considered to be the right time to invest, reduction in interest rate may help a leap in market but increasing oil prices, decline in corporate profits, increase in petrol/diesel prices may tempt to “Sell in may and go away”. Also as mentioned by Forbes the informal fact of selling stocks for summer vacations may also exist as people approach hill regions and will be ready to spend for enjoyment and entertainment.
Will “Sell in May and go away” adage be proved in India this year??? Some top analysts say yes while some shook heads horizontally, lets stay “fingers crossed”.
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10 Comments. Leave new
Great work. Definitely the time has come to watch for the situations in stock market. I particularly do not agree to Sell in may and go away because with so much economic growth I don’t see any downfall in the share market. And even it the prices fall, the market will recover soon.
Very well written
Informative article. With the great amount of instability in stock market these days, nobody can say for sure whether this adage will come true or not.
Good call! Nice work.
Well written article…!
Very informative
Never knew about this adage. Good to know. I think when it initially happened, investors must have feared to invest again same time next year, so the adage may have born like that.
Informative!
Good work!
Informative topic & good artcle