Watch out for corporate earnings and election mood swings
Has it been a while since you had a flow of emotions and been seeking for some goosebumps and excitement? Well then, the price action on the Dalal Street for the past five days would have fulfilled all of the abovementioned sentiments. The double whammy that created jitters among market participants came in form of the Brent crude jumping to the highest levels this year after the Donald Trump administration confirmed that the 6-month relief granted for purchase of Iranian oil will not be extended beyond May 2, and the jump in the VIX, aptly called the 'fear index', which logged its 3-year high and crossed the 24-mark. With this dramatic change in the landscape, it required a super performance by the bulls to turn around things, and just like in a Bollywood movie the ‘hero’ of the movie packs the last powerful punch to mark his victory, the bulls almost did a heroic act and made a spectacular comeback till the last hour of Thursday. However, the bears struck back with a vengeance during the final hour of April series expiry on Thursday. The factors that played a significant role and empowered bulls were many, including earnings of several companies that overshot estimates, which fuelled hopes that the muchanticipated earnings revival will follow this quarter, and also on the back of news that the US will send a highlevel delegation to Beijing to resume trade talks.
On the Wall Street, the S&P 500 and the Nasdaq scaled to record highs on Tuesday amid positive earnings surprise and favourable economic data. However, on Wednesday, major indices retreated from the highs, as a light day on the US economic front kept traders on the sidelines. In the coming days, Wall Street would be busy on the economic front, with the release of reports on weekly jobless claims, durable goods orders and first quarter GDP data due in the coming days, and also, quarterly earnings will see stock-specific action.
As we move closer to the month of May, the markets have hit lifetime highs recently. There is a famous adage ‘sell in May and go away’. Let us peep into the NSE Nifty index data over the past one decade and how it has performed in the month of May. If we analyse the data of NSE Nifty performance in the month of May over the last one decade, it clearly shows that out of 10 times, Nifty has given positive returns in five instances with year 2009 being the prominent year fetching returns in high 20s, followed by return of 7.97 per cent in the year 2014. In the remaining five instances, two corrections of just over 3 per cent were seen and two corrections of just about 6 per cent, while in the year 2018, it remained almost unchanged with a minor loss of 0.03 per cent.
So, the past data clearly suggest that following the adage of 'sell in May and go away' may not always work. Also, we can draw a conclusion that the month of May during the year of Lok Sabha elections has turned out to be quite fruitful for the markets.
Commanding attention in the coming days would be the corporate earnings and macroeconomic data such as infrastructure output and government budget value for the month of March. Also, the fourth phase will go for voting on April 29 for Lok Sabha elections and auto sales figures for the month of April will start trickling in. On the global front, one eye will be on crude oil prices and the other eye will be on the trade talks between the US and China.
