Markets Next Week: Corporate Results, Covid-19 Spread Key

Benchmark indices lost almost 2 per cent in trade this week, as investors continued to worry about the pace of Covid-19 infections in the country.

The week opened on Monday with some massive selling pressure and the weakish trend continued through the week. Stocks from the IT and Banking sector saw losses for the week.

Joseph Thomas, Head of Research, Emkay Wealth Management says: "The markets continued to remain extremely subdued with losses during the course of the whole week, across sectors and segments. The main reason for the downtrend is the rising cases of the virulent pandemic which is causing unimaginable damage to human life across larger states.

While the governments and the healthcare systems are battling it out, it may take some time before we may be able to see some light. While complete lockdowns have been avoided there have been a number of shutdowns at some of the major plants and factories. While the fundamentals support a robust economy, it is too early to assess the potential damages, which is why even the markets have not reacted sharply so far. But the probability, of the resurgence of the pandemic impacting growth and therefore, earning, is quite high for the first two quarters of this year. These factors would continue to dominate the market in the coming weeks too."

According to Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial going ahead, Indian markets are likely to continue with its volatility till COVID-19 cases continue its upward trajectory.

"Investors would continuously watch out government's course of action along with progress on vaccination drive. Once the availability and the pace of vaccination picks-up and daily cases start subsiding, we expect the narrative to gradually shift from Covid-19 and restrictions back to fundamentals. We would recommend investors to take advantage of this volatility as the medium term thesis remains unchanged," he says.

Several analysts and rating agencies including India Ratings have reduced their growth forecasts, thanks to lockdowns and curfew. In fact, India's growth in the ongoing fiscal was expected at a lower 10.4% compared to 11% earlier on account of the increasing restrictions across states, according to State Bank of India (SBI) Research.

With growth slowing for the next quarter at least, corporate results are unlikely to be great. Clearly, investors have to brace for more volatile times going ahead. They should note that markets have rallied very sharply in the last one year and hence one needs to be cautious before investing. Markets across the globe including the US and Europe are also at peak levels.