Benchmark indices came under heavy selling pressure this week with the Sensex losing 4.7 per cent and the Nifty closing 4.5 per cent lower, in what was one of the worst weeks for the indices in recent months.
The Sensex also hit a 14-month low and now threatens to fall even further. Banking shares were the worst hit with State Bank of India, Punjab National Bank, ICICI Bank, Axis Bank and Canara Bank all falling to new 52-week lows. Except Reliance Industries which managed to gain ground there was no place to hide for investors.
As we head into the next week, it looks like markets are going to fall even further as US and European markets fell sharply on Friday. This was despite strong US Jobs data, which now hints at further rate hikes from the US Fed.
The real worry for the markets could now come from the earnings season. Infosys will kick-start the earnings season with its results on Jan 14. This would be followed by TCS and another index heavyweight Reliance Industries.
If earnings as well disappoint there could be further downside to the markets. However, much would depend on how Chinese market behaves. At the moment it looks like things are set to become worse than better.
Domestic institutions have continued to lend support to the market and we need to wait and see the firepower that exists. They have heavily bought into shares in the last few months. On Friday they made net purchases to the tune of Rs 1003 crores, while Foreign Portfolio Investors sold shares worth Rs 1236 crores.
The trend is likely to continue in the next few days, unless global markets calm down.