NEW DELHI: Even as the benchmark indices closed nearly 3 per cent higher, navigating rising Omicron cases and increasingly hawkish US Fed, analysts believe that markets will see consolidation in the coming week.

Interestingly, this week’s rally was led by bank and financial stocks, which have been absent from the limelight, underperforming their other peers. IT and realty stock - two mainstays of recent market rallies - also performed well. The next week may see similar trends.

“The coming week will be driven by the trends in the initial earnings outcome with the IT sector in focus. It is also a busy week in terms of the release of macroeconomic data points like inflation data for December and manufacturing and industrial production data for November," said Vinod Nair, Head of Research at Geojit Financial Services.

Another trend seen during the week was change of hearts from foreign institutional investors. They reversed their selling spree from the last three months, and bought equities worth Rs 3,200 crore during the week, data available at NSDL shows.

But this may just be transitory as pressure for them is rising. The minutes of the last policy meeting released by the US Fed pointed to a faster than expected policy rate hike considering elevated US inflation levels.

“A consistent pattern in FPI investment in January is yet to emerge. A major concern of FPIs is the tightening monetary stance in the US with the 10-year US bond yield rising above 1.7 per cent. Rising bond yields in the US can trigger selling in emerging markets,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Though he added that the Indian market is resilient, and retail and DII flows are strong. Hence, FPIs are unlikely to press sales unless the market rises sharply.

Investors will also keep track of the rising Covid-19 cases in India. The country is already registering more than a lakh cases daily, which are likely to rise. This will lead to more restrictions on movement, eventually hurting businesses.

The week will also see the start of the earnings season as many top IT companies are slated to report their earnings. This will also see IT block in action during the week.

“Markets are likely to consolidate after the recent surge and it would be healthy. Meanwhile, volatility is likely to remain high, citing mixed global cues and Covid-related updates,” said Ajit Mishra, VP - Research, Religare Broking.

Besides, upcoming macroeconomic data and the beginning of the earnings season could further add to the choppiness, he said, recommending continuation of a positive yet cautious approach and preference towards hedged positions.