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Shares could remain subdued in the week ahead as markets shed some of the gains in last week’s pre-election rally.
Foreign institutional investors (FIIs), which had expanded their buying in recent sessions, could book profits by selling technology, health care, capital goods and banking stocks, participants said. The week ahead will also see the January data for the Index of Industrial Production and the February inflation numbers being released. Analysts say the impact would be muted, with the pre-election focus in the market.
On Friday, the BSE Sensex closed at 21,919, up 1.9 per cent or 405 points from its close on Thursday. The National Stock Exchange’s Nifty closed at 6,526, up two per cent or 126 points, a three-month high. However, analysts say the markets are unlikely to sustain these gains. The Nifty could shed 200-250 points or three to four per cent in the week ahead. If it moves up, the Nifty could find resistance at 6,616 levels. On the downside, the Nifty could fall to about 6,350.
| THE WEEK AHEAD |
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EVENTS Mar 12
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Analysts said that hopes of a new Narendra Modi-led Bharatiya Janata Party government had infused optimism in the market, which was pushing up indices. “What we are seeing is a pre-election rally; historically, we have seen about a 10 per cent rise in the market before the elections. The problem here is that the upside remains capped,” said Alex Mathew, head of research, Geojit BNP Paribas Financial Services. “The markets will not be able to rise much from these levels because FII buying is concentrated on the ‘economy’ stocks.” He was referring to those in the capital goods, banking and state-owned companies’ sectors.
Last week, the BSE Sensex gained about 3.8 per cent. The BSE banking, capital goods and public sector stock indices beat the benchmark index, rising 10.4, 8.2 and 7.3 per cent, respectively. Profit-booking hit stocks of the investor-favourites, information technology and health care.
The BSE IT and health care index fell by 4.3 and 2.8 per cent, respectively.
FIIs, on their 17th straight buying session on Friday, net-bought equities worth Rs 2,577 crore. However, this is expected to temper down in the week ahead.
“In the past few sessions, the size of the buying by foreign investors had been too large. That typically happens towards the end of a rally,” said Nirmal Rungta, director and head (private client group), CIMB Securities. He said investors were not only unwinding long positions but also creating fresh short ones.
Analysts said while FII buying was based on underperformance and cheap valuations available in select stocks, FII selling would be across sectors. The mid-cap space, they added, was missing out because of low participation of high net worth individuals, main investors in the category. March is said to be a quiet month for this category.
Globally, the standoff between Russia and Ukraine is being watched keenly by the markets. With the Russian government paying no heed to the plans set forth by the US and European Union, markets continue to remain nervous. “So far, markets have not reacted sharply to this event. But if things worsen, markets everywhere would be severely impacted,” said Tirthankar Patnaik, director and chief economist, Religare Capital Markets. On Friday, European markets ended down about two per cent, while the US markets ended flat with an upward bias.
