The Sensex and the Nifty declined this week, as selling pressure across the globe, roiled Indian markets as well. Immense volatility was seen, following cues from world markets.
In fact, the Dow Jones saw its worst week since March, on fears that growth was beginning to slow in the US. OPEC members also agreed to cut crude production, sending crude prices soaring by almost 4 per cent.
Markets are expected to be volatile next week, given the state election results are likely to be known on Tuesday.
Exit polls suggest a neck-and-neck battle in Madhya Pradesh and Chattisgarh, while Rajasthan is all set to go the Congress way. There would be immense volatility on Dec 11, 2019. Cues from the state elections are considered very significant and a semi-final to the election outcome in May 2019. If exit poll predictions hold true, then it shows the BJP losing ground in some of the states considered as its stronghold.
Apart from the state elections, markets are expected to take cues from global developments. Crude prices once again surged on Friday, and the markets could react negatively to this development on Monday morning. Apart from this, the Dow Jones plunged on Friday, which may lead to weakish Asian cues early next week.
The Nifty could even move in a band of 300 to 500 points next week and investors are expected to exercise caution. Interestingly, inflows into mutual funds has also begun to slow, which means too much of support from mutual funds, who have been buying heavily in the last few months cannot be expected.
Equity schemes saw a decline in inflow from Rs 11,422 crores in Oct to just Rs 7,579 crores in Nov. If the pace of inflows into mutual funds reduces, it could be worrying signs for the market.
Through the year 2018, mutual funds have lent heavy support to the market. The problem for mutual funds is that the large equity funds have also not delivered great returns in the last 1 to 3 years.
If mutual fund investor patience wears thin, it could spell come trouble for the markets. It may just be time to protect your capital.