Benchmark indices ended the week lower, with a near 6.3 per cent fall on the Nifty. The drop came largely on the back of a severe fall at the start of the week, after which the markets could not recoup those losses.
Liquidity to be sucked out
In the next few weeks, there would be enormous liquidity that would be sucked out. Glaxo Smithkline sold shares last week in HUL, for more than Rs 22,000 crores. Apart from this, there are unconfirmed reports that the government will sell its entire holdings in ITC and Axis Bank later this week to garner Rs 22,000 crores. This too is likely to take some liquidity out of the system.
Apart from this, there is the Reliance Industries rights issue, which should also draw out massive money from the markets. All this is likely to lead to some pressure.
Rising covid-cases and lockdown
The rising number of Covid 19 cases, is a cause for worry. Cases in India are very close to the 63,000 mark, with an addition of almost 3,000 cases everyday. This would leave investors worried on whether there could be a further extension of the lockdown.
An extension of a lockdown in the red zones cannot be ruled out. Most of the redzones are areas where the economic activity activity is at the highest, including the likes of Mumbai.
Markets would also closely watch the quarterly numbers and commentary. Companies like L&T Infotech, Bandhan Bank, Nestle, Maruti and Kotak Mahindra Bank are slated to announce their results this week.
Reliance shares, which has the largest weight in the indices has been holding the markets or else we would have seen a further sharp downslide. This week the company said that private equity firm Vista Equity Partners will invest Rs11,367 crore in Jio Platforms for a 2.32% stake. This is Jio Platforms' third deal after Facebook and Silver Lake's share acquisition plans over the last two weeks. Now, there are reports that some Saudi funds are looking to pick a stake. This is likely to keep the stock excited on Monday again.
Markets this week will also react to the results of ICICI Bank declared on Saturday. This results were pretty good, except for the steep provisions due to the likely covid hit.
Global cues have been robust in the week gone by. It's highly possible that global markets may pull back after such a strong week. This too may have some impact on our markets. There are also worries that trade tensions between the US and China could rise once again. All in all, expect a volatile market this week, with more of a possibility of a downside than an upside.