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Dalal Street traders, confused over the market gyrations in recent sessions, may have to brace for more choppiness in the truncated trading week ahead with the January futures and options (F&O) expiry on Wednesday. Cautious sentiment persists ahead of the December quarter gross domestic product (GDP) reading on Friday, which will be closely watched by the market to gauge whether the decline in economic growth has stemmed.
Benchmark indices gained close to two per cent last week, thanks to the strength in global market. However, the indices swung in a tight band for most of the week.
Piyush Garg, executive vice-president, ICICI Securities said, "It has largely been a lacklustre market and we see no reason for the market to gallop on either side. There is some amount of short-covering in the market but there is also a short build-up."
Investors and traders will keenly track the trends in rollover of January derivative contracts to February for cues on near-term trends. The F&O segment expiry session will be held on Wednesday this month, as markets would remain closed on Thursday for Mahashivratri.
"Chances are that there would be more short position build-up in the market in this expiry session as well. The mood in the market has been more negative than positive in this entire series," said Garg.
Sentiment is likely to improve if the GDP numbers exceed estimates though only a few expect such an outcome. Brokers said the market has already factored in a GDP growth of less than five per cent.
"The effect on the market will be seen starting Wednesday (the previous trading session before the numbers are announced). Investors could be seen taking positions on either side in anticipation of the numbers," said Ambareesh Baliga, managing partner, Edelweiss Global Wealth.
US Federal Reserve chief Janet Yellen's testimony before the nation's lawmakers on Thursday will be watched for any clues for a change in Fed's stance on the tapering of its stimulus package - the third quantitative easing (QE3).
"The testimony is not expected to be drastically different from what the Fed has been saying till now. The new chief has made it clear that the policies of the previous chairman will continue. So, the markets have already adjusted for any further tapering in the QE3," said Baliga.
Foreign institutional investors (FIIs) had largely been staying away from the market on account of a cut in global liquidity owing to a $10-billion reduction in the monthly stimulus package of the Fed. According to market watchers, trends in FII trading activity has left investors confused.
Foreign investors have been net buyers at only Rs 635.81 crore, including provisional data from the exchanges so far this month. Participants expect foreign flows to continue, albeit at a subdued pace.
Sectors such as capital goods and infrastructure will be in focus next week, as investors look for value-buys in these weak sectors in the run-up to the elections.
"The metal sector would be watched out for, as Chinese economic data has been disappointing and is creating some concern in the market. Interest would be more in such stocks and sectors that have not been performing well in the last one year," said Dipen Shah, senior vice-president, Kotak Securities.
