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Volatility is expected to persist in markets in the upcoming week due to high valuations and forthcoming policy rate guidance releases, says Vinod Nair, Head of Research, Geojit Financial Services.

The ECB kept the rate status quo and will wait for further evidence confirming inflation control. The release of US payroll data and upcoming inflation data from the US, China, and India next week will provide investors with insights into the global macroeconomic outlook, he said.

Amidst mixed signals from the global market, the domestic market exhibited a range bound movement but concluded on a positive note. Expectations of a rate cut from the Fed and declining bond yields prompted rational investors to shift towards equities, bolstering the market, he said.

An improved macroeconomic narrative favoured banking stocks, while uncertainties in the global market led to weakness in the IT sector. The extension of the Fame II scheme and higher demand forecasts for passenger vehicles led to heavy buying in auto stocks. Faster-than-expected economic growth for the current fiscal year buoyed sentiments for metal and capital goods stocks, resulting in a rally in the respective sector indices, he said.

However, small and mid-cap stocks underwent corrections due to overvaluation, leading to profit booking and increased demand for large-cap stocks, he added.