Foreign institutional investors, who have been pouring money into Indian equities have now slowed down purchases, with net purchases running into just a few crore rupees and in fact last week they have turned net sellers on certain days.

Clearly, markets need to catch up with fundamentals and it would not be surprising to see the markets fall in the next few weeks. In fact, on Friday there was large scale selling pressure in the US, with the Dow having its worst day since June and falling more than 200 points. The reason for the fall were financial performances from McDonald's and General Electric, which disappointed investors.

Indian markets are likely to react on Monday and should open in the red, tracking weak global cues in the US. The week is a truncated week, with a holiday on Wednesday for Dashera.

The results season has been a mixed bag thus far, with TCS and ITC beating expectations, while Infosys belying expectations. Reliance results were in line with market expectations.

Markets are now likely to watch the remaining part of the earnings season, particularly from the big names in the banking sector.

The next two months are likely to be a little tricky for the Indian markets, with the outcome of the US elections, the fiscal cliff problems in the US, European woes and crucial bills that need to passed through parliament. A negative outcome for any of these could be potentially damaging for the Indian markets.

The markets are likely to remain subdued and may drift lower. The best strategy would be to sell on every rally.

GoodReturns.in