Market outlook for next week; selling pressure to continue

Business

oi-Sunil

By Sunil Fernandes

Published: Saturday, March 23, 2013, 9:19 [IST]

It was a bad week for the markets with the benchmark indices ending sharply lower, thanks to political uncertainty and worries over Cyprus exiting the euro zone. There was carnage in mid cap stocks with the likes of HDIL, MMTC, Manappuram Finance, Sintex, Delta Corp and Pantaloon Retail taking a knock anywhere between 10-35 per cent.

The real damage was because of the absence of participation from foreign funds, who net sold on two days of the week. On Friday they net sold to the tune of Rs 14.2 crores, while domestic institutions have been selling to raise cash to subscribe to the government's stake sale in companies.

This week also saw tensions mounting in the Eurozone after imposition of taxes on deposits in Cyprus, which lawmakers in the country rejected. Worries that the RBI may pause its interest rate cut in May, did not help market sentiments. Banking stocks were pounded as investors feel there may not be any more rate cuts as the RBI has hinted that it has limited scope for easing.

Markets are expected to be extremely choppy next week as it is a truncated week on account of Friday being a holiday on account of Good Friday and Wednesday on account of Holi. F&O expiry could on Thursday aggravate the selling pressure. Any political uncertainty could further compound woes for the markets.

It's best to stay away from the markets analysts say, till clarity emerges from Europe emerges and domestically things get more clear. The withdrawal of the DMK from the government would mean that the policy paralysis witnessed prior to September continues. The government may now find it increasingly difficult to push through the reforms agenda, given the fact that it is a minority government running on outside support.

Clearly, it's a difficult phase for the markets and next week is going to be volatile given F&O expiry.

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