Opinion: Global Cues, Derivative Expiry, Budget to Drive Markets

(Sanjeev Bhasin is an independent market analyst)

Indian stock markets are likely to grapple with higher than normal volatility amid global cues, derivative contracts expiry and the forthcoming Union Budget in the coming week.

All eyes are now on Finance Minister Arun Jaitley who will present his first full-year Budget on Saturday. There are high expectations of an "out of the box" Budget which stimulates growth and revives capital expenditure as well as the "animal spirits" for corporate India which has been in hibernation for an extended period of time.

Opinion on the fiscal deficit path seems split. Some economists want Mr Jaitley to stick to the fiscal deficit target of 3.6 per cent for the next fiscal; others want him to go slow on deficit target to boost spending and revive the economy.

February has proved to be a very volatile month for the Nifty as markets have so far witnessed seven days of consecutive correction followed by seven days of consecutive rise. Such movements are generally considered a traders nightmare.

Expiry of contracts on Thursday will also fuel volatility as market participants build new positions in anticipation of the Budget. Foreign flows seem benign with long term money buying systematically while short term players book profit ahead of the budget.

What happened this week:

The Nifty ended almost flat for the week as markets corrected after seven consecutive days of gains. News of an espionage racket in the oil ministry saw heavyweights like Reliance Industries correct sharply. The other noticeable event was the smooth and transparent auction of the cancelled coal blocks.

Globally, the Dow Jones index closed at a new high amid talks that the Greece crisis would be settled. Oil prices also remained range-bound with most players turning bearish in the near term. Gold prices fell for the 3rd consecutive week as money returned to riskier assets.

Technical view:

The Nifty index ended the week with no action on weekly perspective. The index forms a "Doji" candle on weekly charts indicating indecisive phase. Positive momentum could be seen in the index only above 8,910, while 8,800-8,810 will be the supportive zone for the index. Divergences in traditional oscillators indicate increased probability of the index breaking below 8,800 and could possibly get corrected to 8,710. Bank Nifty remains weak below 19,450.

Sector wise, the metal index rose by 3.5 per cent, realty index surged by 3.3 per cent, small cap index gained by 2.7 per cent, FMCG index gained by 2.5 per cent, infra index was up by 1.5 per cent, IT index gained by 1.1 per cent and pharma index edged higher by 0.2 per cent.

The top three gainers on the Nifty were JSPL up 27.6 per cent, Bhel up 6.1 per cent and TCS up 5.4 per cent, while the top three losers were Hero MotoCorp down 5.5 per cent, Reliance Industries down 4.8 per cent and ICICI Bank down 3.8 per cent.

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