The Indian markets have continued their strong run, gaining as much as 14 per cent in the last one month, making it four weekly gains out of five. This week too the benchmark indices gained more than 1 per cent, thanks to a solid rally in some heavyweights like Reliance and Infosys.
The number of rising Covid-19 cases in India and abroad, may put pressure on stocks next week. The Sensex and the Nifty ended the week higher, but, pressure on Friday across the US markets, could lead to some selling pressure in stocks on Monday morning.
The US Dow Jones closed 730.05 points lower, or 2.8%, at 25,015.55, while the S&P 500 fell 2.4%.
The real worry for the markets could be the rising Covid-19 cases in India and the United States. In fact, states in the US like Texas have rolled back some re-opening. In India, Covid-19 cases have now crossed the 5 lakh mark. Saturday also saw a record number of cases at 18,552, with the last six days adding to about 1 lakh new Covid-19 cases.
Time to be cautious
"Given the concerns over economic de-growth and rising infections, the market seems to be taking a pause and consolidating at this juncture. Investors would keep a close watch on global cues and geo-political tensions between US-China and India-China to get market direction. We would advise investors to stay cautious and focus more on quality large caps with select exposure to good mid-cap names," says Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd.
It's also important at this stage for investors to stay focussed on the largecap companies, which may withstand the economic downturn much better.
We might see greater volatility in the markets in the coming days, and the best way would be to buy on dips. The Nifty and the Sensex have already rallied as much as 35 per cent from March lows and the risk to reward ratio has diminished a great deal. It would therefore be advisable to stay cautious before entering at these levels.
On the other hand, if you have already invested, it would be prudent to stay invested, without selling.