However, late on Friday US Federal Reserve St. Louis Fed President James Bullard said the Fed could taper in October. This spooked the US markets, with the Dow Jones plunging more then 180 points on Friday.

The next week we could see markets drifting lower ahead of the earnings season, which is likely to be dismal. It's therefore a good opportunity to sell stocks as the Sensex has reached a 3-year high.

In fact, markets may open lower on Monday given the comments by Bullard.

Banking stocks are likely to face the heat once again next week after the RBI hiked repo rates on Friday. However, it's possible that the hike in repo rates, may not necessarily lead to margin compression, given the fact that banks may choose to pass on the rates to customers to protect their own margins.

SBI Chairman, Pratip Chaudhuri has said that he may have to hike deposit rates, which could also lead to higher lending rates.

Clearly, banking stocks may remain volatile in the next week, with the bias clearly on the negative side.

Of course, another interest rate sensitive sector, the real estate sector might also see the selling pressure continue. DLF already plunged 11% on Friday, following the RBI decision to cut rates, followed by scores of other real estate lenders.

Clearly, investors may continue to look to hide in defensives like pharma and IT, with stocks of companies in this sector already becoming expensive. It would also be interesting to see how results of IT companies unfold given the huge run-up in some of the stocks from the sector.

If you thought volatility was behind us, that may not be the case. Stocks have had a furious run with the Nifty rallying almost 900 points in 15 trading sessions. It's best to sell and keep your powder dry, for the next leg down.

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