Stock Markets May fall Next Week, Time To Be Cautious

Indian stock markets have rallied significantly by almost 35 per cent, from the lows seen in the month of March. In fact, the Sensex and the Nifty have rallied for six straight weeks out of seven. Global markets too have gained, on hopes of opening of lockdown in various cities around the world.

Surging Covid-19 cases a real worry

A sharp surge in Covid-19 cases is once again a cause for worry in India and countries like the US. India saw a record number of 24,850 Covid-19 infections on Saturday, with the tally now crossing the 6.7 lakhs mark. India is now likely to cross Russia and emerge as the nation with the third largest reported infections around the world.

North and South America too have seen a sharp spike in Covid-19 cases. The region reported on Saturday a record number of 129,772 new cases, bringing the total in the region to nearly 5.58 million. Several cities in the US are seeing a record number of cases. Some cities in India have extended their lockdown, while some have imposed a complete curfew over the weekend, for example cities like Bengaluru.

The above could be a big dampener for the markets in the coming week. There have been hopes of vaccines, but, that too could clearly be a few months away.

Time to exercise some caution

Markets have rallied a fair bit and at the current levels, stocks are no longer attractive. It's best to stay with cash, at least for sometime. One is not sure how things could evolve in the next few weeks. Having said that the world is flush with easy money, thanks to central banks around the world. Hence, it now a question of liquidity vs fundamentals and we have seen in the past there can be a tendency for liquidity to win.

In any case one needs to be cautious and stay invested, but, to take fresh positions from hereon, could be a little risky, given the sharp rally of the last few weeks.