Markets to be range-bound with upward bias next week

The stock market will witness volatile and range-bound trade with an upward bias in the last week of 2011 amid the Christmas and New Year festive cheer, according to analysts.

In a portent of the investor sentiment in the final trading week of 2011, the BSE benchmark Sensex surged by 248 points last week due to a sharp fall in food inflation and an upgrade of Indian government's long-term bonds by global credit ratings agency Moody's.

Food inflation fell sharply to a four-year low of 1.81% for the week ended December 10 from 4.35% in the previous week, which raised hopes that overall inflation might dip as well and prompt the Reserve Bank to start cutting interest rates to revive sagging economic growth.

Moody's Investors Service raised India's local currency debt rating by one level to investment grade from the highest junk grade in the past week, boosting the market sentiment.

However, experts feel trading volumes will be subdued, as most investors will prefer to remain on the sidelines toward the end of the year. Nevertheless, the overall tone of trade will remain upbeat.

"Stock markets are already down and nothing worse can happen this week. All eyes will be on the derivatives expiry on Thursday. Some rally is possible for a change as markets are extremely oversold on one hand and on the other, US markets are showing marked improvement," CNI Research CMD Kishore P Ostwal said.

Analysts also said investors will prefer to refrain from aggressive adjustments and make fresh investments in the New Year.

"The holiday mood has set in the market, which is why it is likely to see range-bound trading and will see a significant movement only after the foreign funds will get fresh allocations in the New Year," Geojit BNP Paribas Research Head Alex Matthews said.

Marketmen said the stock markets may see a gap-up opening on Monday, following the rally in the US stock market on Friday, with the Dow Jones Industrial Average rising by 1%.

"For the coming week, market is expected to remain choppy in the range of 4,630 and 4,850," Kotak Securities Senior Vice-President (Equity Research) Shrikant Chouhan said.

Market observers opined that the lack of any major domestic and global cues would result in the market hovering in more or less the same range in the last week of the calendar year, though a higher close will be a positive end to a difficult year.