Markets Next Week: Increased Volatility To Continue

The Indian markets lost ground this week, with the Sensex closing the week 2.81 per cent lower, thanks to sharp falls on Monday and Friday.

Tensions across the border with China had a part to play in the sharp fall on Monday, while on Friday it was extremely weak set of cues from across the globe, which played its part.

The markets have rallied significantly from the March lows and there is likely to be profit booking at higher levels. Banking stock have over the last few weeks seen sharp gains and there was selling seen at higher levels in some of the bluechip banking names.

The Supreme Court on Thursday directed banks not to declare any loans that were standard as of end-August as non-performing until further orders. This resulted in across the board selling on Friday.

Indian markets to take cues from global developments

Indian markets would increasingly take cues from global developments. In fact, on Friday Indian markets fell sharply thanks to weak global cues. Interestingly, domestic institutions have been net sellers in the cash markets for many days now. Probably, there have been worries over stretched valuations. In flows into mutual funds has also tapered and one would increasingly look to see if there August numbers will change that.

Foreign Portfolio Investors have been net buyers over the last few weeks, though that could change quickly. There are not too many cues at the moment given that corporate results are behind. Much would depend on global developments and global markets.

However, the one thing that may continue to worry the markets is the border tensions between India and China. This could be one of the reasons for the sharp fall seen on Monday and Friday. At the moment it looks like valuations are stretched and any rise should be used as an opportunity to sell.

Investors who have invested may continue to stay invested.