Markets Next Week: Heightened Volatility Ahead Of Union Budget

The Sensex lost 0.8 per cent this week and broke the 2-week winning momentum. Some heavyweight stocks like Reliance Industries and HDFC Bank saw selling pressure, which pushed indices lower.

However, the Sensex did hit a new record during the course of the week, of 42,273.87 points, while Nifty also hit a fresh record high of 12,430.50 on January 20.

Globally, this was not the best week, given the scare over the outbreak of the Corona virus. US markets too saw a sharp fall on Friday as one case of the virus was detected in the US. Chinese markets fell and crude oil too dropped, on worries over the Corona virus spreading.

Shares in Yes Bank, was the star in trade, after comments from SBI chairman stating that a bank of the size of Yes Bank would not be allowed to fail.

Volatility expected ahead of Union Budget

Heightened volatility is expected ahead of the Union Budget on Feb 1, 2020. There would be trading as usual on the Budget day, which falls on a Saturday.

Markets are looking for a whole lot of things, including a cut in the Long Term Capital Gains tax to doing away with dividend distribution tax. If some of these changes do not go through, it is highly possible that there maybe a strong downward reaction. It is likely that if there are changes in the income tax rates to benefit individuals, there might be no goodies for the stock markets. To many giveaways would result in the fiscal deficit moving higher.

It is advisable neither to go short nor long. The right strategy would be to stay invested in high dividend yielding stocks like Coal India, ONGC and Oil India. In fact, some of these stocks are near their new 52-week lows.

It's time to be a little cautious.