It was a third straight week of losses for the markets, with the Nifty ending the week 1.1 percent lower at 9,039 points and the Sensex ending the week 1.4 percent lower at 30,672 points. The Nifty Midcap index ended 2.5 percent lower, while the Nifty Smallcap index lost 2.2 percent, during the course of the week.
Banking stocks fell sharply on Friday, following the Monetary policy announcements. Investors sold into stocks, after the RBI decides to extend the moratorium on loans to Aug 31, 2020. This did not go down well with investors, as banks would have to grapple with NPA related problems in the next few quarters. It's also likely that retail loans in the next few quarters could be impacted.
Shares of ICICI Bank and Axis Bank were the worst hit on Friday with both stocks falling 5 per cent each. On the other hand, IT stocks managed to salvage the situation and saw good buying support.
Select banking stocks could rally
Some of the banking and a larger HFC like HDFC have the potential to rally. Banks on the other hand that have a greater exposure to micro finance institutions like IndusInd Bank and Bandhan Bank may take time to recover.
HDFC is also slated to declare its results on May 25th and a dividend too is expected. The stock could stay volatile, a day after its quarterly numbers are declared.
If one is buying banking stocks, it's best to stick to the larger names like HDFC Bank and ICICI Bank, which could weather the storm better, as and if things get worse.
Also, bulk of the weight is accorded to banks in the Nifty, and there is a limited choice that investors could choose from, if they ignored banks.
Stocks exchanges to have a truncated week
The stock exchanges, will be closed on Monday, due to a Eidh. This means the markets would have a truncated session next week, Global markets are expected to remain increasingly volatile on mounting tensions between the US and China.
China is poised to impose a new national security law on Hong Kong after months of anti-government protests in the territory, which saw Asian markets fall on Friday. In fact, the Hang Sang plunged almost 5 per cent in trade.
Global markets are likely to be monitored more closely next week. Rising number of Covid 19 infections could also dampen sentiment in India. Infections in India have now crossed the 1.25 lakhs mark.
Brace for lot more volatility next week.