Buy in May and Celebrate Diwali or Sell in May and come back on Diwali.

 11^th May 2022

Buy in May and Celebrate Diwali or Sell in May and come back on Diwali.

Dear Fellow Investors,

Namaste! We are dealing with the ATTITUDE for investing for the last 2 posts. The one thing which adds to the Attitude is our belief as we have seen in our yesterday’s post. While we may cling to our beliefs, the market is always changing its moods and working patterns.

Usual Belief in Indian Market: -

Sell in May and come back on Diwali. In India, May to September is a Rainy season, and being an Agriculture dependent economy, all the activities were diverted towards agriculture. If the rain is good – other things will become good over a period of time.

Moreover, during the monsoon, we have our religious celebrations – like CHATURMAS / Shravan / Ganesh / Shraddha period and Navratri. Due to this as such people are busy with these activities. So, they lack the focus on the market.

Due to the above two reasons – it was prudent to sell in May and come back on Diwali as we will have a lot of clarity with respect to Agriculture and other activities going forward.

What has been the recent Trend?

Those who are in the market from Harshad Mehta time or before they know that we used to have Diwali Vacation after Mahurat. There used to be a 15-day break to do the settlement as the settlement used to happen on Paper. In the year 1994 – The government allowed FIIs investments for the first time in India. Since then slowly and gradually, we are aligning our activities along with FIIs.

Look at our bold call on 2/5/2020 about Nifty going towards 12000. It was given in May only. Just look at the Nifty chart of 2018 /2020/2021 – all charts have seen a low in the month of May and a top in September or October.

How the situation can change this time?

War is discounted. Inflation is being dealt with. The rate hike is also discounted. Corporate results in India is also discounted. If you see all major positives and negatives have been known to all the market participants.

Gradually, the focus will shift to earning money in the given situations and people will look for opportunities for investing and recovering their expenses. FIIs have been sellers and they have sold from October 2021. Now, they are flush with cash. They will look for BOTTOM fishing in some markets. India has been doing good in the current times compared to other economies. So, they may jump into the Indian market with the smallest positive developments. They will start discounting the future based on the same and tons of money will come to the Indian market for sure.

Can we compare current situations with a Patient?

Say somebody is seriously sick and admitted to the hospital. Being a person of good social status – his near ones will get tons of calls from all the relatives and friends about his health. Gradually, the number of calls will reduce as the person is still in the hospital, and the chances of his coming back are very less.

Now, two things can happen. Since he is sick for a long – all have accepted that he may die. If he dies, there will be a lesser shock to the near ones as he was in the hospital for a long time. But if he recovers – there will be a lot of celebration among the family and friends.

The world economy is passing through the same serious sickness since the USA delinked Dollar from the Gold in 1970. It has been 52 years and the sickness is getting accepted as a new normal. All the economies are on the steroids of money printing. Now, they are finding out the ways to enjoy given the sickness as normal things. I am sure India will respond to the sickness with some positive signs of recovery in the coming time. This will end up attracting tons of money in the coming time.

What is the survey of the normal investors tell you?

Today 9 out of 10 investors are negative about the market. The market knows this. The market is known for surprising the most seasoned investors so to surprise the normal investors is very normal for the market.

Keep this in mind if you are also negative about the market.

How the market will surprise you?

The market will surprise by the sudden up move when everybody is negative and it will surprise with the companies that will move.

It means the market may move up but your portfolio may or may not move up.

From our side, we have already talked about Mother of all Bull Runs coming way back in March 2022.

What NEXT?

Go deeper and find out your beliefs about investing. Check those beliefs with the market trends in the past years. If you observe your beliefs and the market does not tally, go for the market’s way.

Remember – The market is always right.

Happy Investing.

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Learn a Lesson. Live with Passion & Invest with Reason.

Hitesh Parikh.