Going into election results, stocks from sectors like PSU banking and infra have rallied substantially. So, if the BJP's results do not match what was shown in the exit polls stocks from these sectors could fall.
Stocks like Bhel, NMDC and PSU banking stocks like Syndicate Bank, Canara Bank, Oriental Bank have easily rallied 5-10 per cent this week.
In the last few days these stocks have fired up on hopes that there would be a Narendra Modi led BJP government at the centre. This investors believe would lead to an uptake in the capex cycle which should benefit companies like Bharat Heavy which are largely capital goods and infra companies.
Along with this, the US non farm pay rolls data, which came in better then expected is also likely to build expectations that the US Fed Reserve could even engage in a tapering exercise as early as this month.
US non farm payrolls data showed that the US added 203,000 jobs as against a consensus estimates of around 180,000.
This is certainly not good news for Indian markets as it would raise the fears of QE3 tapering once again.
Key data during the week would also include the inflation data which would raise the prospects of one more repo rate hike by the Reserve Bank of India in its policy meet slated for December 18. Thereafter there is the Fed meeting which ends on the same day.
Clearly, it's going to be a data heavy and event heavy month and one can brace for immense volatility.