Top 3 Sectors to Watch in May 2024

On Friday, the Nifty index closed at 22,420, down 150 points (0.67%). However, it ended the week with a 1.23% gain and formed an indecisive candlestick pattern on the weekly chart.

The Nifty opened above the 22,600 mark but could not surpass its prior session’s high. It soon faced profit booking, losing its opening gains within the first hour and trading lower throughout the day.

The Nifty managed to close at a critical support level defined by the 20-day moving average (20-DMA). A drop below this level could lead to further corrections, with 22,240 likely acting as strong support. On the upside, resistance is expected at 22,470 and 22,630. Given the various events scheduled for May, it’s important to identify which sectors could be key performers.

Considering historical performance and the technical setup, here are the top three sectors to watch in May 2024:

1. Nifty Bank

The Nifty Bank index consists of the most liquid and large Indian banking stocks, providing a benchmark for the capital market performance of Indian banks. The index comprises a maximum of 12 companies listed on the National Stock Exchange (NSE). HDFC Bank, ICICI Bank, and Axis Bank together account for about 62% of the index’s weightage. The index gained 2.28% in April, and based on its historical seasonality, it has delivered an average of 2.9% gain in May. This consistent performance makes it one of the top sectors to watch.

2. Nifty FMCG

The Nifty FMCG index represents the performance of fast-moving consumer goods (FMCGs), which are non-durable, mass-consumption products available off-the-shelf. It includes 15 stocks from the FMCG sector listed on the NSE. After losses in January, February, and March, the index gained 0.65% in April. Historically, it has delivered an average gain of 2.6% in May, with only one instance (in 2019) of negative performance since 2013. This sector’s reliable performance in May suggests it could offer strong returns in May 2024. 

3. Nifty Auto

The Nifty Auto index reflects the performance of the automobile sector, including 4-wheelers, 2 & 3-wheelers, auto ancillaries, and tires. It comprises 15 tradable, exchange-listed companies. In April, the index gained 3.23%, making it the sixth consecutive month of gains. Historically, the index has shown an average gain of 2.5% in May. Since 2020, it has consistently delivered positive returns in May, indicating its potential for strong performance in May 2024. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.