Last week, the domestic market closed well after the initial weakness amidst rising COVID-19 cases, mainly due to a supportive global market.
But, the US job data announced last weekend showed significant slippage than forecasted, signaling sluggish momentum in the labour market while cyber-attack hiked oil prices, triggering fall in global market.
During this fall, the technology sector is the most impacted being the best beneficiary from pandemic followed by heavy commodity stocks.
The Indian indices continued to extend its losses during the week due to concerns that a hike in world inflation will slow down domestic economic recovery and accelerate selling by FIIs, which is already under pressure due to lockdowns.
Correction has started, as seen this week, but early to state that it will continue and it is overheated only by liquidity poured by governments & central banks.
We are at risk of further downside in the corporate earnings forecast, the risk of fall is higher when we are trading at high valuation, 20x one year forward P/E for Nifty50 index.
On the other hand, if commodity prices correct and a stability in bond yield is achieved, US Govt 10-year bond yields are in uptrend, the market risk will reduce.
New drivers of the economy like Chemicals, E-commerce, Digitalization and Green oriented businesses due to government reforms & policies will add impetus in a pandemic and green energy-oriented world.