The Editors' Cut | Market Expectations In May | NDTV Profit
Will 'sell in May and go away' work this time for the Indian markets?
Here's what Niraj Shah and Samina Nalwala are discussing on today's 'The Editors' Cut'.
For the latest news and updates, visit: ndtvprofit.com
Here's what Niraj Shah and Samina Nalwala are discussing on today's 'The Editors' Cut'.
For the latest news and updates, visit: ndtvprofit.com
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TVTranscript
00:00 There are a few sayings in the market and this one's quite popular.
00:04 Whether or not it has panned out is another question.
00:08 But sell in May and go away is an adage that is quite familiar to a lot of people that
00:13 have been in the markets for long enough.
00:15 And this is something that I would like the two individuals that are joining me today
00:20 to debate because I've seen a very interesting set of arguments on both sides.
00:26 And I would, am I right in saying that Neeraj you're saying this may not come to pass?
00:31 And what do you, no, it's the other way around.
00:36 Samina is saying that this may not come to pass.
00:38 It may be positive.
00:39 We're just discussing it.
00:40 No, no, no.
00:41 We're not taking sides.
00:42 It has to be a pro and against.
00:44 So one of you have to take a pro and one of you have to take an against.
00:47 You're going pro?
00:48 No, you're going pro.
00:49 No, no, actually the way we are trying to do this is I'm talking a lot more about what
00:54 global factors might be doing.
00:55 So fair enough.
00:56 What it's going to be is sell in May and go away.
01:00 Does not happen this time is what Samina is saying.
01:04 And what you're saying is that…
01:05 My argument is just that, that it may not work this time around as well on the global
01:09 side even if Samina is saying that it will work, it will not work on the local.
01:12 I'll put the reasons why.
01:13 You know, we'll let you decide.
01:14 How about that?
01:15 You decide the conclusion of this conversation.
01:16 Okay, fine.
01:17 Let's make it quick.
01:18 But yeah, just a couple of things and of course we'll talk about all the good things which
01:22 Neeraj will bring in.
01:23 But if I was looking at F&O data as we go into a brand new series this May, a couple
01:29 of factors that did stand out.
01:31 Now remember these are just data points which may or may not stand as we go into the month
01:37 but definitely worth the mention.
01:39 One of them is April rollovers which have been fairly healthy actually didn't see,
01:44 were lower than what we saw in the previous month and worse is what we've seen in the
01:48 last three months.
01:49 For example, your April rollover number was 65.12 versus nearly 70% in March versus 72%
01:58 in the month of Jan.
01:59 So what I'm trying to say is that bulls were not feeling as aggressive at the start of
02:03 the May series.
02:04 Along with that, markets are bracing for some volatility.
02:08 Remember you've got these big events that are lined up, of course local elections being
02:11 the biggest one for us.
02:13 Rollover cost also were much lower.
02:15 So not much lower but there were definitely more than half the rollover cost that we've
02:19 historically seen at 0.3% versus a three-month average of 0.72.
02:24 Apart from that, the long-shot ratio of FIs which with a disclaimer is looked very different
02:30 yesterday but at the start of the month the bias was on the short side.
02:34 So traders, FIs were a little more cautious.
02:36 At the start of April you mean?
02:37 At the start of May, we are at the start of May, right?
02:40 Yeah but you're saying now.
02:41 So as we go into May, at the end of the April series rather, we were seeing the long-shot
02:48 ratio biased towards the short side.
02:50 So all that made it seem like May could be a difficult month.
02:54 You've also got a whole bunch of events.
02:56 So you've got your elections, you've got the US Federal Reserve, FOMC meet, you've got
03:00 some of those quarter earnings.
03:01 Geopolitical while in the back burner yet is tough to call, right?
03:05 I mean it's almost impossible to decide who decides to go after whom, what comes out of
03:09 this and of course it's the China factor which the sleeping dragon has woken up but whether
03:14 or not that's going to cause problems for us is anybody's guess but historically and
03:19 this is what Neeraj is going to also agree with me on, every election May has actually
03:24 been phenomenal for the markets.
03:26 You don't need me to agree.
03:27 Data needs to agree with you.
03:29 And actually to add to that which we'll substantiate, we saw this yesterday where Bank Nifty took
03:34 the lead and again historically in an election year, Bank Nifty does better than the index.
03:41 So those are prime, and you primarily talked about the domestic factor.
03:44 I am on the fence.
03:45 I'm just going to make this clear.
03:46 I'm on the fence.
03:47 That's the easy one.
03:48 I can say I'm on the fence too.
03:49 No, no, you're wise.
03:50 You're a positive wise.
03:51 Guys, it's just, this is an old saying, sell in May and go away.
03:55 Another very old saying is that the hottest place in hell is reserved for those who sit
04:00 in the fence.
04:01 Thanks, Alex, just in case.
04:03 Since I'm going to heaven, I take a stance.
04:08 So the question only is whether sell in May and go away works or no.
04:12 Now typically as has been seen on the global markets at least, this usually happens when
04:17 there is a very good rally or a very strong rally ahead of May.
04:21 Global markets, US markets in particular, and this time around it hasn't quite happened.
04:24 So in some sense it's not been a red hot rally.
04:28 Usually that used to be the case when, and then the markets used to come off.
04:32 So what are the known devils, right?
04:34 Expectations of a rate cut have been pushed out, but it's a known devil because this is,
04:41 no, let's first talk of the possible, okay, these are not the possible market triggers.
04:46 These are the known devils.
04:47 So I think we've got the caption wrong.
04:49 But the point is these are the known devils that expectations of a rate cuts, postpone
04:54 and reduce.
04:55 That's part one.
04:56 The strength of the US economy is resulting in higher yields.
04:59 Higher yields is a known devil.
05:00 Everybody knows that this is the case, right?
05:03 The benchmark US oil futures have risen by over 15 to 20 percent, a known devil.
05:07 We know that that is happening, right?
05:09 And that's around us.
05:10 And the threat of China invading Taiwan, widening Middle East war and more geopolitical conflicts,
05:15 known devils.
05:16 So excuse me again, these are not possible market triggers.
05:19 These are the known devils that the market has had to contend with and know about it.
05:24 Now the possible good news are these, which are coming up now.
05:29 The sticky part of the US inflation, as per some people, including Ed Yardiny, is not
05:34 very high.
05:35 And at some point of time, we'll surprise with the downside.
05:38 Downside that will come.
05:39 So that is one possible positive.
05:41 Tailwind.
05:42 Yeah, tailwind, positive, whatever you call it.
05:45 There is strength in the US corporate earnings thus far, which is actually auguring very
05:49 well for future valuations.
05:51 80 percent of the S&P 500 so far at least?
05:54 Yes.
05:55 And it's come out well.
05:56 And therefore, one argues that if those earnings stay steady and we move out three, four months
06:01 into this year, then the market start looking at 2025 earnings instead of 2024.
06:05 They follow the calendar year, viewers, so keep that in mind.
06:07 So that's the other part.
06:09 The higher oil prices is already getting a lot of shale oil supply to start coming in
06:15 again to the fore.
06:16 It was dormant.
06:17 It's starting to come up.
06:18 Does that help in the eventuality of oil prices staying higher?
06:23 Point number three.
06:24 Point number four, the US market multiples, as I said, 20 times, but steadily might get
06:28 discounted.
06:29 So in some sense, the devils are known.
06:32 The unknowns have a positive tinge to it if we don't see a proliferation of geopolitics.
06:38 My only point, Neeraj, is that while this is all known, this also makes the margin of
06:44 safety very low, right?
06:45 If everything is...
06:46 Any surprise events.
06:47 So, yeah, it could be viewed very negatively.
06:50 And also, while we may see a pretty fantastic May, which is what we...
06:55 I mean, after yesterday, I think anyone who is doubting that, including me, is now taking
07:00 a step back thinking, you know, this is actually looking like a very solid setup.
07:03 What happens after May?
07:05 While we may not have a price correction, there may be a very long, long time correction
07:09 that we'll have to suffer because the end of the day, even if it is a multi-year bull
07:14 run, not just for India, we've seen that in Japan, we're seeing it in the US, Europe is
07:18 coming out of the woods and so is China.
07:20 So I mean, and that's anyone's guess.
07:23 What we could do, though, is...
07:25 So we figure out whether or not...
07:26 Go long on the nifty.
07:27 Go long on the nifty, maybe, okay?
07:29 That could be something that you could interpret.
07:31 But we'll revisit it at the end of May to see if sell in May, go away, actually panned
07:37 out and what the path forward would be because we'll have the election results to talk about
07:41 as well.
07:42 Oh, wow, that's going to be a volatile...
07:43 I have a question here, and which is that post-May, something I was talking about, well,
07:49 if Prabhu Das Iradhar is to be believed, the nifty is hitting 25,800.
07:53 No, and I think I spoke to Harold yesterday, he said double digit returns in FY25 and I'm
07:59 thinking double digit for another year?
08:02 After FY24, yeah, that's phenomenal.
08:04 All right, so viewers, let me know what you think about what we had as a conversation
08:09 today.
08:10 Is there anything that sell in May and go away will pan out this time around?
08:14 Let us know.
08:14 Thank you.
08:19 [music]