After enduring five consecutive months of declines, the Indian stock market appears set for a strong recovery in March, with historical trends suggesting further upside in April. Analysts at JM Financial have highlighted a consistent seasonal pattern favoring gains in April, particularly for midcap stocks, metal and auto sectors, and select individual stocks in the Futures & Options (F&O) universe.
April’s Historical Performance: A Strong Seasonal Trend
Seasonality, the tendency of markets to follow certain price patterns during specific months, has played a key role in April’s performance over the past decade.
Nifty’s April Track Record:
The index has closed in the green in 7 out of the last 10 years.
Average return: 2.4%
Median return: 1.3%
Nifty Midcap Index Outshines Nifty:
The Nifty Midcap index has shown even stronger seasonal strength, ending higher in 8 out of 10 years.
Average return: 4%
Median return: 4.3%
The Midcap index has outperformed the Nifty in 9 out of 10 years, with an average outperformance of 1.6% and a median outperformance of 2%.
This suggests that midcap stocks may be the biggest beneficiaries of April’s seasonality, making them attractive for investors seeking higher returns.
Sectoral Performance: Metals, Autos, and Energy Lead the Charge
Certain sectors have displayed strong seasonal trends in April, historically outperforming the broader market.
Top-Performing Sectors in April:
Metals: Positive in 8 out of 10 years, average return of 7%
Autos: Positive in 8 out of 10 years, average return of 5%
Energy: Positive in 8 out of 10 years, average return of 4.6%
CPSE (Central Public Sector Enterprises) Index: Positive in 8 out of 10 years, average return of 3.6%
Among these, metals have been the standout performer, delivering strong outperformance against the Nifty in 9 out of 10 years, with an average outperformance of 4.6% and a median outperformance of 2%.
Other Sectors Showing Positive Seasonality:
Banking: Positive in 7 out of 10 years, average return of 3.4%
FMCG (Fast-Moving Consumer Goods): Positive in 7 out of 10 years, average return of 2%
Highlights: Metals, autos, and energy stocks have historically led the April rally, making them key sectors to watch for further gains.
Technology Sector Faces Seasonal Weakness
While most sectors have shown strong April trends, technology stocks have bucked the trend, delivering weak performance during this month.
Tech Sector’s April Struggles:
Closed in the red in 7 out of 10 years.
Average return: -1%.
Underperformed Nifty in 8 out of 10 years.
Average underperformance: 3.4%.
Median underperformance: 5%.
This suggests that investors should be cautious with IT stocks, as they tend to struggle in April.
Stock-Specific Trends: Winners and Losers in April
Historical seasonality also extends to individual stocks, with certain companies consistently delivering strong gains in April, while others tend to underperform.
Top Performing Stocks in April (F&O Universe):
The following stocks have closed in the green with over an 80% probability, delivering average returns of over 8% in April:
Glenmark Pharma
SAIL (Steel Authority of India Ltd.)
CESC (Calcutta Electric Supply Corporation)
JSW Steel
Vedanta
Aarti Industries
Aurobindo Pharma
APL Apollo Tubes
SRF
Stocks That Tend to Underperform in April:
Certain stocks have historically struggled during this month, recording a probability of decline exceeding 70%, with negative returns of over 7%. These include:
Infosys
HCL Technologies
Solar Industries India
Wipro
Given the weak seasonality in technology stocks, it is unsurprising that Infosys, HCL Tech, and Wipro have been among the biggest laggards in April.
Highlights: Where to Focus in April?
With historical data indicating strong April performance for the broader market, investors may consider tilting their portfolios towards sectors and stocks that have consistently delivered gains.
Investment Strategies Based on April Seasonality:
Favor Midcap Stocks Over Large-Cap Stocks
Nifty Midcap index has outperformed Nifty in 9 of the last 10 years.
Investors may benefit from selective midcap exposure to capitalize on the seasonality effect.
Focus on Metals, Autos, and Energy Stocks
Metals have delivered the strongest returns, with JSW Steel and Vedanta among the best performers.
Auto and CPSE indices have also shown strong seasonal trends, making stocks in these sectors attractive.
Avoid Technology Stocks in April
Infosys, Wipro, and HCL Tech have historically struggled.
Underperformance in the IT sector suggests investors should be cautious before adding new positions.
Look at Stock-Specific Trends
Stocks like Glenmark Pharma, SAIL, and APL Apollo Tubes have been consistent April winners.
Conversely, Infosys, Solar Industries, and Wipro have been consistent underperformers.
With March set to break a five-month losing streak, historical trends suggest that April could bring further gains, particularly in midcaps, metals, and auto stocks. However, given the weak seasonal trend in IT stocks, investors may need to adjust their portfolios accordingly.
As always, while historical seasonality provides valuable insights, investors should also consider broader macroeconomic factors, earnings reports, and global market trends when making investment decisions.
