Markets primed for breakout after bouts of volatility

The markets are all set for a breakout after an intense bout of volatility in January. Volatility seems to have shaken up the market literally, with a section of the market saying that there was a distinct change in the holding pattern of index shares and select mid-caps from traders to investors.

Market sources indicate that ownership of key shares has now moved from weaker hands to stronger hands, adding that volatility normally signals an imminent new phase of a bull/ bear market.

Vijay Saraf, chief operating officer, Centrum Securities, says, "One strong factor that could swing the pendulum into positive territory is the slew of 'good quality' initial public offerings (IPOs) hitting the market in the next two months." This may get quality retail money back into the markets leading to a further upswing, he adds.

Manish Shah, head of retail products at Motilal Oswal Securities, says, "The IPOs will definitely expand the size of the markets in terms of number of investors and also market capital but this may not necessarily lead to a upturn in the secondary markets."

Rajesh Kamdar, dealer with a local brokerage, says, "the bout of volatility seen in January is the harbinger of a breakout in indices." He adds that the trigger will be the success of the ONGC IPO after which indices are expected to shoot up.

Says the research head from a domestic brokerage, "We expect the markets to remain volatile and range bound this month and to begin moving up in March, by when major IPOs would have sailed through and the post-election political alignments, trends and policies will be better visible."

Most market participants agree that the long-term India story is very much in place with domestic consumption, outsourcing, and huge infrastructure spends.

Analysts say that the boost has been provided by the Indian cyclical recovery, global commodity upswing and corporate capex recovery, what with major plans being announced, especially in power, telecom, oil and engineering.