Indian stock markets may see continued gains in May despite the Wall Street adage 'Sell in May and Go Away'. According to reports from The Economic Times, the average Nifty returns in May for the past 30 years have been 1.84%, and at 2.14% after adding dividends, said Sham Chandak, head of institutional equities at Elios Financial Services. In the past 10 years, Nifty has posted gains in six instances, while the Nifty 500 index has gained on seven instances, according to data from Motilal Oswal Financial Services for the past decade. As reported by The Economic Times, while a classic 'sell in May and go away' trade may not materialise, upside could remain capped amid an elevated dollar and crude prices.
The Indian markets demonstrated exceptional strength in April, with both Nifty and Sensex gaining 7.5% and 7% respectively - the highest monthly gains since December 2023, as reported by The Economic Times. The Midcap 150 jumped 13.2% - the biggest monthly upmove since November 2020, while the Nifty Smallcap 250 soared 17.1%, posting its best monthly performance since its inception in April 2016. According to The Economic Times, Indian markets were shut on Friday for Maharashtra Day, and the strong rebound since April this year has been supported by slowing foreign selling pace. "Although May seasonality, returns-wise, is slightly better, one needs to be mindful of rising crude prices and cues on monsoon," said Sriram Velayudhan, senior vice president at IIFL Capital Services.
Despite positive seasonal trends, analysts warn of emerging structural challenges in India's traditional market pillars. As reported by The Economic Times, Ravi Dharamshi from ValueQuest Investment Advisors, who manages around ₹24,000 crore in investor money, argues that IT services is facing AI-led structural disruption rather than temporary demand lapses. The consumption sector is suffering as a second-order casualty, with IT employment and income growth slowing downstream, affecting discretionary spending patterns. Dharamshi estimates the ongoing geopolitical crisis could shave 3-4 percentage points off FY27 earnings growth, bringing expectations down from 16-17% to approximately 12-13%. The Union Budget had implicitly assumed crude at around $70, but oil has since moved closer to $90 for the full year, creating additional pressure on sectors dependent on crude derivatives.
Analysts expect moderate gains with small- and mid-caps to continue outperforming large caps in May, as reported by The Economic Times. Chandan Taparia, head of technical and derivatives research at Motilal Oswal Financial Services, expects May to see more moderate, stock and sector-specific moves rather than broad-based buying. "After April's strong rally, May is likely to see more moderate, stock and sector-specific moves rather than broad-based buying," said Taparia. Sriram Velayudhan, senior vice president at IIFL Capital Services, said Nifty is likely to trade in a range of 23,800 to 25,000 for the month. Chandak from Elios Financial Services expects the market to be largely range-bound in a 500-point range on Nifty given geographically uncertain environment and Q4 earnings season could be difficult overall.
Despite positive seasonal trends, analysts caution about potential headwinds that could limit significant upside. As reported by The Economic Times, Chandak noted that Indian equities are no longer trading below their historical average valuations, they are at par now. The pace of foreign selling is slowing, but rising crude prices and monsoon cues remain key factors to monitor. According to The Economic Times, elevated oil prices and a strong dollar could limit significant upside, with the West Asia conflict simmering in the background adding to market uncertainty. "While a classic 'sell in May and go away' trade may not materialise, upside could remain capped amid an elevated dollar and crude prices," analysts warn. Dharamshi's warning about earnings dispersion suggests that the traditional pillars of IT and consumption may no longer drive Nifty's next chapter, with structural shifts requiring investors to focus on emerging sectors.
