A range-bound run seen ahead

MARKET WATCH

The indices are expected to remain range-bound during the week, with a negative bias. The global cues would have an important bearing on the direction of the market, as the tussle between the bulls and the bears plays out.

Despite NIFTY having crossed its all-time high some weeks back, the Sensex continues to trail behind. The Sensex closed higher by 99 points in a week marked by a fair amount of volatility.

The range bound movement on the indices may be attributed to the built-up in 4100 and 4200 Nifty options. In the event of a breakout, short-covering could take the indices further up. Such a move will have to be supported by fundamentals, though.

The advance tax figures for the current financial year reveal a mixed picture. One would have to watch the derivatives open interest positions, with 9 working days remaining for the expiry of the current month contracts. The expectations about the first quarter results, which are just a few weeks away, will drive sentiments as well.

Almost three months after the February crash, the Sensex broke the 14000 levels on May 16. It is a month since then and the Sensex is hovering in the band of 14000 to 14600. Though the Sensex has hardly budged during the month, there has been a lot of sectoral churning. The metals, capital goods & banking sectors shone, whereas FMCG, pharma, cement and auto were gross under performers. It was a mixed bag for oil & gas, telecom & technology.

Going forward, Reliance Industries is likely to take the lead in case of a market upmove, ably supported by sectors such as capital goods & telecom. A lot will also depend upon the trends in banking & technology, which are interestingly poised on two critical factors, interest rates and rupee-dollar movement, said Kamlesh Kotak, Head Equity Research, Asian Securities.

Another analyst with a local brokerage house said that global cues will continue to drive the domestic sentiment. The base metal prices, crude oil and US bonds are some of the things to look for. If the US markets on Friday were any indication, the bond yields have moderated and stocks have improved on a lower-than-expected rise in consumer prices.

The Indian equities may open on a positive note on Monday, taking a cue from the positive US markets and provided there are no negative signals from the Asian markets during the intervening period.

The successful closure of DLF's initial private opening is a pointer that liquidity is not an issue. A further confirmation, if one was needed, is ICICI's follow-up offer and other issues which have been lined up. The demand in secondary market is also robust, albeit price and quality elastic. Good quality and attractively valued shares will continue to find buyers.

On the other hand, the CBDT circular clarifying that income from certain stock market transactions will be considered as business income, could dampen sentiments. The short term income/gains will attract a tax of 30 per cent, and not 10 per cent, as envisaged earlier.