Markets Next Week: Momentum Continues To Remain Strong

It was a good week for the markets, with the Sensex crossing the 53,000 points mark for the very first time and ending the week higher. Global cues were very supportive with the S&P 500 hitting a new record high.

Reliance AGM was keenly watched during the week, and following the AGM Reliance Industries saw its shares come under pressure for two consecutive days. There maybe some buying in the stock at lower levels. Markets were a little disappointed as there was no indication of an Aramco stake in the company.

Metal and banking stocks bounced back sharply towards the end of the week, particularly on Friday.

Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services, "Earnings season for FY21 ended on a strong note with Nifty EPS growing at 14.2% YoY to Rs 539 - the highest since FY11. We expect earnings momentum to accelerate in FY22 as the pace of vaccination has picked up and the economy opens up further. Good monsoon so far also supported bullish sentiments. Hence we expect the long term trend of the equity market to remain positive. Near term direction of the market would be determined by commodity price led inflation and its impact on interest rates."

Global markets would be eagerly watched

Indian stocks would take cues from global developments. Bond yields on the US 10-Year gained on Friday, as investors continue to worry about a spike in inflation. Nonetheless, US markets surged on Friday, which means there could be a strong handover to the Asian markets on Monday morning.

At the moment, markets all over the globe are in a sweet spot. Interest rates continue to be low, easy monetary policies continue and in India, mutual funds are flush with funds. Given that, it is unlikely that the global markets would see any meaningful drop.

The one place where we are actually seeing a drop is in gold. The precious metal has been falling ever since the US Fed indicated that there could be as many as two hikes in interest rates by end of 2023. Some analysts are suggesting given the recent fall of nearly 5% in the precious metal, it may not be a bad idea to buy into dips. However, gold investors would need to be more patient, more than anything else.

All in all, Indian markets are overpriced at these levels and we are all aware of the same. However, it is liquidity that is driving the markets higher and that is unlikely to change.