Market Outlook This Week: F&O Expiry, Global Banking Stress To Keep Markets Volatile

Trading last week was extremely volatile, with global markets impacting sentiments, particularly banking sector woes. Domestic equities also came under pressure after the Government passed the Finance Bill 2023 in the Lok Sabha. As per the amendments, STT on the sale of options and futures has been increased. However, clarity related to the hike is still awaited.

The bill also proposed to remove indexation benefits for Debt mutual funds. On Friday, Nifty opened flat and witnessed sell-off throughout the session to close with loss of 132 points (-0.8%) at 16945 levels. All sectors ended in the red with major selling seen in PSU Bank, Metals and Oil & Gas. Indian markets yet again witnessed last hour selling after sharp decline in European markets and uncertainty about the hike in STT on F&O trades.

"Next week will see further increase in volatility due to monthly F&O expiry amidst the highest FII short position. Also it would be a shortened trading week due to holiday on Thursday," says Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd.

The global banking sector stress is also likely to weigh on markets, even as we saw on Friday massive selling in the stock of Deustche Bank.

According to Dr. Joseph Thomas, Head of Research, Emkay Wealth Management, The equity markets remained under stress as the transmission of the news of bank failures adversely affected the sentiment.

"The hike in the base rate by the Fed and Bank of England, and the persistence of inflation, and the therefore of the hard money policy, has been viewed as negative for the markets in the immediate term. These factors may continue to influence market movements in the coming week too," he said.
All in all, brace for some volatility with F&O expiry, truncated week and a fragile banking sector.