The Week Ahead: Correction, volatility, data to drive markets

The Week Ahead: Correction, volatility, data to drive markets

The markets are likely to see further correction in the week ahead after breaking a 6-week rising trend to end in the red. Volatility would be at its highest as we head into a futures and options (F&O) expiry week on Thursday. Another trend setter for the period would be the January-March quarter GDP data due on Friday, which would confirm that the economy grew at its slowest pace in the last 10 years.

The global rally finally succumbed to the vertigo effect with Tokyo's Nikkei recording its largest single day fall in the last 2 years, which triggered a global long-due correction. A huge rally in the 10-year Japanese bonds, which saw yields spike from 0.38 per cent to over 1 per cent, was touted to be the main cause, however, it could be termed as a routine correction also given the biggest equity rally of the last decade.

Gold prices finally staged a rally after declining for 4 weeks while oil and other commodities continued to be weak.

The Nifty ended the week down 3.29 per cent, while the BSE Sensex declined 2.87 per cent. The high beta 'Bank Nifty' ended lower by 4.12 per cent for the week.

Technically, the Nifty now faces resistance at 6,040 levels and support at 5,870 levels. The Bank Nifty, however, faces resistance at 13,000 levels and support at 12,400.

The markets finally saw a huge bout of profit booking as despite record inflows the rupee continued to play spoil sport and touch a high of 56 before settling at 55.6.

This resulted in a dampened sentiment while weak global cues saw the markets cave in after a stellar 6 week-long rally.

Bond yields on the 10-year government paper continued to fall which indicates that the Reserve Bank of India (RBI) would surely cut rates in June. Another sentiment spoiler was weaker-than-expected results from heavyweights like State Bank of India and Larsen & Toubro.

The correction also saw the broader market correct far more severely than the Nifty with CNX Nifty Midcap 50 losing 5 per cent and other high beta momentum counters like PSU banks, real estate, metals and infra stocks losing 5-20 per cent.

Tracking the 'A' group stocks, top three gainers of the week were ABB, which surged by 21.23 per cent, Adani Power, up 17.15 per cent, and United Spirits, up 12.12 per cent. Top three losers of the week were Wockhardt, down 33.46 per cent, HDIL, down 17.95 per cent, and Ranbaxy Laboratories, down 17.85 per cent.

We had been recommending investors to 'sell the rallies' and sit on cash as the markets were looking 'frothy' with global liquidity being the only driver.

Now, after some more consolidation and an improvement in Macro data investment with a slightly longer term horizon would be the key theme.

Another noticeable occurrence is that despite the correction, foreign flows continue to be positive with overseas investors continuing to repose huge confidence in the India story, which would be the key gainer as money continues to sell oil and gold to chase equities for outperformance in the future.

Disclaimer: Sanjeev Bhasin is an independent market analyst. The opinions expressed here are the personal opinions of the author. NDTV is not responsible for the accuracy, completeness, suitability or validity of any information given here. All information is provided on an as-is basis. The information, facts or opinions appearing on the blog do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.

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