Stock market in May: Nifty 50 delivered positive returns in six out of ten times; these sectors rallied the most

As the Indian stock market steps into the month of May, investors may want to pay closer attention to a subtle but recurring phenomenon: seasonality — a pattern of returns that tends to repeat at specific times of the year. An analysis by JM Financial reveals that Indian stock market indices, sectors, and select stocks often display consistent trends in the fifth month of the year.

Nifty 50 and Mid-Cap Indices: Modest Gains in May

Over the past decade, the Nifty 50 has delivered positive returns in May six out of ten times, with an average return of 1.5% and a median return of 2%. The Nifty Mid-cap index mirrors this trend with green closes in six years, but with slightly lower gains — average return of 0.4% and median return of 1.2%.

Interestingly, the Mid-cap index has outperformed the Nifty 50 on six occasions, albeit with mixed results, according to the JM Financial report. The average underperformance was 1.1%, while the median outperformance stood at 0.4%, suggesting varying levels of momentum across different years.

Sectoral Winners and Laggards

The seasonality story becomes sharper when dissected at the sector level. In May, Auto and FMCG sectors stand out for their consistent and strong performance:

- Auto: Closed higher in 8 of the last 10 Mays, delivering an average return of 3.9% and a median return of 4.9%. It also outperformed the Nifty on 8 occasions with an average outperformance of 2.4%.

- FMCG: Also green in 8 out of 10 years, clocking an average return of 3% and a median return of 2.6%, with consistent outperformance vs. the Nifty on 7 occasions.

- Banks, Financials, and MNCs – each up 7 times, with average returns ranging from 2% to 2.5%.

On the flip side, no sector closed in the red in 7 or more years. However, in terms of relative underperformance vs. Nifty

- Metals and Pharma underperformed in 8 out of 10 years, posting average relative losses of 2.9% and 4.2%, respectively.

- Energy and Media sectors also lagged behind the benchmark in 7 years, with average underperformance of 1.8% and 1.5%.

Stock-Specific Trends: Consistent Outperformers and Underperformers

Among F&O stocks, a few names have demonstrated a high probability of delivering strong positive returns in May:

Top Seasonality Performers (>80% win probability, >5% avg. return):

- Mahindra and Mahindra (M&M)

- Kotak Mahindra Bank

- Container Corporation of India

- KEI Industries

- Hindustan Aeronautics Ltd (HAL)

Conversely, certain stocks have shown a tendency to underperform during May, closing in the red 70% of the time with >3% average losses:

- Bank of India

- Steel Authority of India (SAIL)

- Punjab National Bank (PNB)

- IIFL Finance

- Bank of Baroda

Conclusion

While past performance is no guarantee of future results, seasonality trends can offer an additional layer of insight when planning trades or reviewing sector allocations. As May unfolds, Auto and FMCG stocks could be worth a closer look, while exposure to Metals and Pharma might warrant caution. For stock pickers, aligning with historically strong names like M&M or HAL could add a seasonal edge to their strategy.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.