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In the week ahead, the stock market is likely to ride on bets on the outcome of the state election results, foreign inflows and better-than-expected economic data.
The shares are expected to open firm this week after the September quarter gross domestic product (GDP) expanded faster than what the market was expecting. As the week progresses, the focus is expected to shift to the outcomes of the elections in five states due on Sunday.
For the week ahead, analysts expect the market to find support at 6000-level and touch highs of 6230 levels. "Volatility would continue through the week until the Nifty crosses the 6300-mark," said Shubham Agarwal, vice-president senior analyst technical equities, Motilal Oswal. On Friday, the BSE Sensex ended the day up 1.3 per cent at 20,791 while the NSE Nifty closed 1.4 per cent high at 6,176. American Depository Receipts (ADRs) of Indian companies listed in the US also rose the same day post the release of the GDP data after the local trading hours.
Analysts said markets were betting heavily on the Bharatiya Janata Party (BJP) winning the upcoming state elections. Foreign investors were already seen building fresh long positions in the market post the expiry of the November derivatives contract on Thursday.
"The positions being taken in the market do indicate a consensus that the BJP will do better than the others," said Dipen Shah, senior vice-president, research, Kotak Securities. "But we believe that indications of a stable coalition would be better for the market." However, some also said the market may not leave room for any disappointments. "It is a market participants' built consensus that is driving the markets. It will not have any bearing on the outcome of the elections," said Swapnil Pawar, chief investment officer, Karvy Capital.
Through the week, FIIs were net buyers at Rs 1,317 crore while domestic investors were net sellers at Rs 977 crore, according to provisional data. The November HSBC Purchasing Managers Index manufacturing and services data, to be released on Monday and Wednesday, could contribute to the market volatility as the numbers are expected to be subdued and largely in-line with market expectations.
Further, sales numbers to be released in the week ahead would add to the momentum in the auto stocks, analysts said. The numbers are expected to be subdued due to poor festive demand pick up.
"The sales numbers would largely remain muted, except for the two wheelers that could see some upside," said Shah. Stocks like Tata Motors, Mahindra & Mahindra, Hero MotoCorp among others are expected to do well, analysts said. During the last month, the BSE automobile sector has moved up two per cent, while Tata Motors and Mahindra & Mahindra have moved up 4.8 and 6.4 per cent, respectively. However, two-wheelers Bajaj Auto and Hero MotoCorp have declined by 7.2 and 1.3 per cent, respectively during the period.
The banking sector particularly, the public sector lenders with its beaten down valuations, could also see some upside, said market watchers.
"There is a realisation in the market that things are not as bad as they were expected to be. Results have been better and valuations have been beaten down in these stocks," said Pawar.
But opinion remains divided on the prospects of this sector. "Low valuations may have made these stocks attractive but that cannot carry the stock for long. Concerns regarding bad loans are still not over for the sector," said V Balasubramanian, vice-president and fund manager, IDBI Asset Management.
The week ahead
Event
Monday
* HSBC PMI manufacturing data
* Auto sales numbers
Wednesday
* HSBC PMI services data
