Indian and global markets are witnessing unprecedented volatility in the last few weeks.
On Friday, the Indian benchmark indices fluctuated 10 times between gains and losses, to end the day higher. In the previous two trading sessions on Wednesday and Thursday the Nifty lost 2.2 per cent.
Severe volatility in US markets
A lot of the volatility in global stocks is coming from the US Markets. The start of the week began with weakish data from China, which saw global markets reacting negatively.
Following this, Apple sounded a warning of slowing sales in China, which saw huge corrections across global markets.
On Friday, a solid nonfarm payrolls data, which showed an increase by 312,000 in December, easily topping all forecasts, saw 3 per cent gains for the S&P 500.
The jobless rate rose from an almost five-decade low to 3.9 percent, pushing benchmark indices in the US higher.
Unprecedented volatility is being seen in the US markets and it would be interesting to see what follows.
Liquidity to drive Indian markets
One would have to watch the inflows into mutual funds for Dec, 2018, when data is released by AMFI. For the month of Nov 2018, there was some slowing down in equity inflows into mutual funds. If the trend shows a further dip, we could see robust inflows into mutual funds slowing down considerably.
Over the last one year, we have seen these inflows into mutual funds, sustaining the Indian markets at higher levels. With General Elections for 2019 round the corner, it would be interesting to see the impact on mutual fund inflows, particularly into equity mutual funds.
Interesting churn happening
In 2018, stocks from the Nifty that gave the best returns were IT stocks, including TCS, Infosys and HCL Tech.
Interestingly, we seen some selling pressure this week in IT stocks, after Apple's warning on slower growth. Banking stocks are now back in the limelight and we saw some massive buying interest in PSU banking stocks and private sector banking names like Karnataka Bank. Going ahead, we are likely to see the trend continuing and money flowing into banking stocks. This is largely on hopes that the NPA mess is now behind and worst for the sector is now over.
We may continue to see volatility next week, based on global market movements.
Investors are advised to exercise some caution before investing. January also marks the results season and investors would await corporate numbers eagerly. Indian markets are not very cheap and unless there is a meaningful correction, it would be advisable to stay on the sidelines.