Last 10 years’ data shows May belongs to bulls; will it be different in 2017?The S&P BSE Sensex and Nifty, which closed above its crucial resistance level of 9,300 last week, should be able to hit fresh highs in the month of May, claim experts.

Kshitij Anand

Moneycontrol News

If you thought that the market has hit a ceiling then think again. Data for last 10 years shows that bulls remain in a dominant position in six out of 10 years.

The S&P BSE Sensex, which reclaimed mount 30K and Nifty which closed above its crucial resistance level of 9,300 last week should be able to hit fresh highs in the month of May, claim experts.

Investors who have gone long in the index should continue with their positions with a target of 9,500 in the short term and a strict stop loss placed around its gap zone of 9,250-9,225 levels.“The month of May is typically a continuation month as the prevailing trend normally continues. In India, we have historically seen the markets either topping out of bottoming out between November and February,” Deepak Jasani, Head - Retail Research, HDFC Securities told moneycontrol.

“We don't think May will be a topping out month this year for India. If at all we may see some consolidation for a few months followed by the next leg up,” he said.

On the weekly scale, Nifty gave a consolidation breakout above 9,273 and registered a fresh high of 9,367 which is a bullish sign. For the momentum to continue, Nifty should be able to hold above 9,300 on a closing basis.

Last 10 years’ history shows us that Nifty has given a minimum return of 3 percent and a maximum of 21 percent while on the downside it has slipped 3 percent and maximum a little over 6 percent.While it is unlikely for the market to repeat a performance of 2009 when indices rose nearly 21 percent after a strong rally seen so far in the year 2017, but a minimum 3 percent return could be expected. A 3 percent return from current levels could well take the index towards 9,500, similar to what technical chartist are projecting but fundamental experts see some bit of consolidation after a sharp run-up in prices.

But, as you know, markets are unpredictable.“I believe, while a correction scenario can't be denied, but a sharp correction is unlikely, rather a consolidation phase seems more possible. The late catch up by FIIs has boosted the rally and I believe it is still not out of steam,” Prakarsh Gagdani, CEO, 5Paisa.com, (an IIFL subsidiary) told moneycontrol.

“The strength of large caps recently will likely provide key support to the indices, even as pocket wise corrections may begin. Having said that, I must advise retail investors to be extremely cautious at this stage and don't go overboard with the euphoria,” he said.

Even though fundamentals of the Indian market look strong but if US market takes a hit after a sharp run-up in prices then things could take turn for the worse for markets across the globe, and not just for India.

The trigger for a correction in US markets could be geopolitical tensions, high valuations or maybe even quarterly numbers.

“An external trigger impacting Indian market is possible in the near future, perhaps even as early as May. There is a likelihood of a correction in the US markets since all expected news has come,” Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services told moneycontrol.

“So, ‘buy on rumours sell on news’ theme may play out. A correction in the mother market can impact all other markets. Since valuations are on the high side any trigger can impact the markets,” he said.