Friday, May 8, 2009

>Infogram (ANAGRAM)

Will Momentum last?

Our bellowed Sensex had one of the best months in last ten years. After May of 1999, first time we saw sensex rising for than 17% in a month. Last month is this report we advised our reports to buy stocks as we foresaw good times. How do we judge the weather now? Well, slightly overcast to say in brief. There are many events scheduled over a month which can derail our rally and the advice is to remain indoors or carry an umbrella (strict stop loss) when you dare to venture out!

In the US, there is a market maxim, 'Sell in May and go away'. The idea is to sell in the month of May and enter after Halloween in November. The saying is based on some studies that show that returns during the November-April period are better than the May-October period.

We scanned the data in India from October 1989 onwards to find whether the rule applies to us as well. We found that while the April October returns in the last 19 years were 9.38% on an average. The returns were positive in 12(63%) out of the last 19 years. The returns in the October to April returns were 12,57% in the last 20 years. The returns were positive in 15 (75%) of the last 20 years under study.

The month of May is notoriously bad for equities. In the last 19 years, it has given a negative return of 0.97%. This is the second worst month after October, which has an average loss of 2.81%. In the last 19 years, the month of May has returned losses in 9 out of 19 instances. Besides, the month of May has some other idiosyncrasies as well.

To see full report: INFOGRAM