A morning walk down Dalal Street | Market likely to remain volatile with multiple hurdles towards 10,500

Indian markets witnessed a sell-off on Friday with the Nifty 50 index tanking almost 150 points.

The index slipped 1.6 percent while the S&P BSE Sensex witnessed a fall of 1.2 percent for the week ended October 19. Selling in large-cap names such as RIL, TCS, as well as renewed concerns about liquidity conditions in the NBFC space, dented investor sentiment. RBI opens banking tap to ease liquidity crunch at NBFCs also failed to lift sentiment. The provision will allow banks to free up Rs 50,000-60,000 crore of liquidity which banks can lend to NBFCs till December 31.

“Post the IL&FS crisis NBFCs are facing a credit crunch, with liquidity drying up and banks reluctant to lend to the sector. We maintain a cautious view on this sector,” Hemang Jani, head of advisory, Sharekhan by BNP Paribas said. “We prefer private banks such as HDFC which have a healthy CASA ratio.

Investors with patience and a longer holding period can systematically accumulate corporate lending banks such as ICICI Bank and Axis Bank over the next 6-9 months for handsome gains (better than benchmark indices) over 24-30 months,” he added.

Given the fact we have expiry in the coming week, markets are likely to remain volatile. As long as the index trades below 10450-10480 zones it could slip towards its crucial support and recent swing low of 10200-10138 zones.

On the upside, multiple hurdles are seen at every small bounce towards 10500 levels.