The Indian stock market is taking a pause after seven weeks of consecutive gains. As the week began, the S&P BSE Sensex and the Nifty 50 declined 1.4 percent and 1.2 percent, respectively, in the first hour of trade on Monday. This is being seen as investors taking a breather after the strong rally.
Over the past seven weeks, the BSE benchmark Sensex gained 13.7 percent while the broader Nifty 50 surged 13.2 percent from their March lows. The market has been buoyed by strong global cues along with significant policy reforms and pro-growth measures announced by the Indian government.
However, the short period of correction in the markets is being attributed to a few factors. These include profit-booking in the strong indices, the overall uncertainty in the economic scenario due to Covid-19 crisis, and cautious stance adopted by investors towards upcoming quarterly results.
Amidst this scenario, the week ahead will be a test for the Indian markets. Experts foresee a period of consolidation in the markets and expect them to respond to the major economic events lined up—the Reserve Bank of India’s Monetary Policy Committee meeting on June 3 and the quarterly results announced by big corporate players.
The banking banking system is expected to remain volatile, with orignial equipment manufacturers, realty, media, metal, healthcare and pharma, and consumption sectors likely to particularly influence the trend in the markets. Given the current macroeconomic fundamentals, trading activity could remain subdued.
It is important to note that the impact of the Covid-19 pandemic continues to be a major factor, as strict restrictions imposed at the ground level have yet to be relaxed. With the second wave of the virus hitting parts of India in the next few months, markets will remain highly sensitive to news related to Covid-19.
Investors are therefore advised to observe caution and remain invested in this unpredictable market. A well-diversified portfolio focused on long-term returns should be the ideal strategy to be adopted by the moderate, long-term investor.