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Markets Next Week: Expect Some Profit Booking
Markets are expected to remain volatile next week, even as the last leg of the earnings season continues.
This week, we saw bouts of the same, with the Nifty falling more than 100 points on Thursday, only to see a sharp recovery on Friday.
The list of smaller cap stocks hitting 52-week lows only continues. The trend in the large caps is remarkably different, with several of them seeing solid buying.
Banking stocks were volatile during the course of the week, as the Reserve Bank of India (RBI) raised interest rates for the second successive time this week. It is likely that the RBI may now pause for sometime this year, before beginning a tightening cycle next year.
Several stocks reacted to news or quarterly numbers. Shares in Jet Airways was exceedingly volatile after reports of a cash crunch at the company. Coal India was one stock from the Nifty that saw good buying support. There were reports that the impact due to wage hike maybe behind and volumes at the company had improved.
Most of the auto stocks also reacted to numbers during the week. Maruti shares saw a good amount of selling after its quarterly numbers lagged estimates. Tata Motors also reported numbers that were below expectations, but, the price damage in the stock was not too severe given that the shares have already fallen dramatically this year.
Small and midcap stocks saw some recovery in trade this week, and did not plunge in the market carnage of Thursday.
Going ahead the week is expected to be volatile, though the indices may continue to find support, given that all the money from the carnage in midcap and smallcaps is finding its way into large caps.
Investors are advised to trade with caution, given that we have state elections in the next few months. If you are planning to invest for the long term, it is better to place money into defensives. For example, a stock like Coal India offers you a decent dividend yield of 6 to 7 per cent can protect your capital in the event of a severe downtrend in the markets.
It is wise to therefore look at some stocks like these, which can shelter you, in case there is a massive downslide in equities.
