Markets next week: GAAR, Banking woes in Europe to hog limelight

Updated: Saturday, July 12, 2014, 10:38 [IST]

This week the Sensex saw its biggest weekly fall since Dec 2011. The Budget failed to enthuse investors, while retail investors turned sellers through the week. FIIs net sold in the cash market on Friday in excess of Rs 700 crores.

On the same day markets fell sharply after the government said that the General Anti-Avoidance Rules (GAAR) will be applicable from April 1, 2014. There were hopes that GAAR would be postponed to 2017. What this means is that FIIs operation out of Mauritius now have to pay a short term capital gains tax. This did not go down well with the markets and many FIIs sold.

There were also concerns of banking worries in Europe, after problems at one of the top banks in Portugal. Now, these two concerns may continue to worry markets in the next week and a further downside cannot be ruled out. The Union Budget was satisfactory and the reactions to the same were mixed.

The earnings season began in right earnest with Infosys and IndusInd Bank reporting numbers that were in line with estimates. Going ahead individual stocks would react to their quarterly numbers.

Next week, one would also have to keenly watch the impact on mid cap stocks which were battered out of shape on Friday. Several stocks lost between 6-10 per cent as investors continued to pound mid caps.

The next week might also see a tactical realignment of portfolio. Defensives like IT, Pharma and FMCG may continue to be preferred bets, while investors may sell high beta stocks.

It might be an interesting week with immense volatility. Stay away if you do not have an appetite for risk.

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