While you may escape the sweltering May heat by flying to cooler climes, there may not be any escape for investors in the month of May since, after October, this is the worst month for stocks.

A study of the last 18 years demonstrates that March (-0.39 per cent), May (-0.74 per cent) and October (-1.63 per cent) are the months in which stocks have given negative returns.

But if you were to consider the last five years only, then October slips out of the list and you are left with March and May which have seen average declines of 1.17 per cent and 1.61 per cent respectively.

Let's concentrate on May alone. The month has turned negative returns in eight out of the last 18 years under study. And how can investors forget  the sell-offs seen in May 2004 and May 2006?

There is another peculiarity to May. Since 1998, it has given negative returns in alternate years. We saw declines in 1998, 2000, 2002, 2004 and 2006. This is 2008, which makes it a contender for yet another fall.

Besides the dubious track record of the month, let's see whether we have other triggers that could lead to potential losses in the month.

May is the month in which the atomic energy treaty is likely to be taken out of the cupboard, dusted and given another look. The International Atomic Energy Agency meets on May 5 and 6, and the Left and the UPA will meet to take stock of where they stand on the issue.

The parliamentary session should also end by then. If the UPA wants the Left to pull the rug and force an election, then this is their chance now.

By going ahead with the nuclear deal, the UPA can force the Left to finally bite after years of barking. But with the inflation inferno still on and no fire tenders in sight, the UPA may not want to take the gamble. So a rally in capital goods will also be ruled out.

Fundamentally speaking, it will be difficult to justify any further rise in the markets. As the April derivatives have expired comfortably at the 5,000 level in the Nifty, punters have been expecting a rise to the level of 5,350 and then 5,550.

My sense is that companies reporting quarterly numbers in the month of May may not bring good tidings for the markets. Margin pressures will continue. Secondly, companies that are late to report are usually the ones that spring a nasty surprise.

More importantly, stocks have seen a substantial bounce from their March lows. While the Sensex has seen a rise of 13.9 per cent, 89 per cent of the regularly traded stocks on the BSE have given returns in excess of that. I do not remember any period in which stocks have out-performed the Sensex by such a wide margin.

Look at the returns - 73 per cent of stocks have returned more than 25 per cent from their March lows and one out of every four stocks on the BSE has returned more than 50 per cent. With so much of a rise, it may be a good idea to book profits in May. One of the methodologies to adopt is trailing to stop loss. The Nifty has serious resistance at 5,550 and 5,368.

The Fed could cut rates further by 0.25 per cent at its next meeting. Any signal emanating from the Fed that it has got into the pause mode should strengthen the dollar. A strong dollar could dampen the sentiment for commodities.

Whether it will buoy our tech stocks will be a function of what affect the fire-fighting by Dr Reddy has on the rupee.

Keep your fingers crossed for the month of May.