Markets are expected to be volatile ahead of next week's assembly elections, particularly in India's largest state, Uttar Pradesh. The results are largely seen as a referendum to the de-monetization and could give an indication on what lies ahead in the general elections of 2019.
The one good thing is that any steep selling pressure would result in buying from domestic institutions, which would support the market. Mutual Funds in particular would be flush with funds, given the fact that we are seeing solid inflows into tax saving schemes.
For the first time in many weeks, we have seen some selling pressure that is coming. For example, there seems to be some profit booking near the 29,000 levels on the Sensex. It has been almost flat cash inflows through domestic institutions and foreign portfolio investors in the last few days. The probability of the markets grinding along is quite high.