Volatility in market likely to continue next week; investors to be cautious

Covid-19 cases in India continued to rise at a fast pace as the third wave gained momentum. However, the impact of the third wave, both on the health infrastructure and the economy has so far been relatively muted.

The Q3FY22 earnings, though in an early stage, have been on expected lines. They so far reflect strong demand during the festive period, but the majority of companies are feeling the impact of higher input cost inflation leading to compression in operating margins.

With demand being buoyant, analysts expect companies to pass on some of higher input costs in terms of price hikes over the next quarter so as to protect margins. On Monday, the market will also react to earnings of two heavyweights- Reliance Industries and ICICI Bank.

With just about a week left for the Union Budget, buying and selling on expectations may also keep markets volatile.

Selling by foreign investors has been a worrying concern, not just during the last week, they have been bearish for the last four months now. During January, they have withdrawn Rs 8,791 crore from equities so far, data available on NSDL shows.

"Five days of consecutive weak trends in the US has impacted market sentiments. This might have influenced FPIs decision to sell in India, which they consider over-valued. FPI investment behavior has become highly volatile and inconsistent,” said an analysts.

according to the analysts there are no expectations from the budget as far as foreign portfolio investment is concerned. However some announcements regarding the inclusion of India in the global bond index is expected.