Markets Next Week: Global Cues To Remain Key

Indian benchmark indices ended the week with solid gains of nearly 6 per cent. Global cues were also strong in the course of the week, which propelled Indian markets higher.

The gains mostly were led by some of the beaten down banking names. Stocks like ICICI Bank, HDFC Bank and HDFC contributed to big gains during the course of the week.

GDP numbers in line with estimates

Markets will also react to a number of developments on Monday. It will react to the GDP numbers which were slightly ahead of estimates. The numbers came in after close of market hours on Friday.

As was expected the number came in at 3.1 per cent, which was more on line with estimates. "Overall, better-than-expected growth in agriculture and fiscal spending (explained by 4.6% fiscal deficit in FY20) led to higher GDP growth. We expect real GDP to decline 21% in 1QFY21," Motilal Oswal said in a report.

"Although the headline numbers are much higher than expectations, details suggest that core real GVA (ex agriculture and community services) grew at all-time low 1.1% YoY in 4Q vs. previous all-time low of 2% in 3QFY20 (since 1998 when quarterly data became available). This was in line with our forecast. Further, private consumption grew only 2.7% (reflecting impact of COVID), while fiscal consumption grew very strongly at 13.6% last quarter. Gross investments declined for third consecutive quarter at 6.5% in 4QFY20," the report added.

Global markets to remain key

Global cues are likely to be volatile surrounding tensions between US and China, ignoring positive news-flow of stimulus and economies opening up. Apart from this, riots in various cities of the US, following the death of George Floyd has left 25 cities under curfew in the US.

"Protests over George Floyd's death continued for a fifth night Saturday with escalating violence and multiple instances of fires in several major cities. Curfews have been enacted in at least 25 cities, including Minneapolis, Philadelphia and Los Angeles.
In New York, at least two police vehicles were set on fire, according to CBS New York," CBS News reported.

This is likely to have some impact on global markets, which are already suffering the pain of the global Covid 19 pandemic.

In India, Covid 19 cases have already begun surging with the numbers now crossing the 1.80 lakhs mark.

With the markets already having rallied significantly in the last week, we may see some selling pressure likely to emerge at higher levels. Investors are advised to exercise caution as the markets would continue to be volatile.