The week ahead: Markets gearing up for year-end rally

The week ahead could see the market consolidate and gain ground after 2 weeks of losses. Key indices bounced back from week's low as sentiment in global markets turned bullish, on hopes that the US apex bank will persist with its loose monetary policy for quite some time.

Technically, the Nifty retraced from 6000 and closed at 6056 ending the week down 1.38 per cent. The Nifty now needs to convincingly trade above 6100 for the next week to show strength. Support now comes at 5960 and resistance at 6156. The high beta "Bank Nifty" also found support at its 100 dma (day moving average) at 10535 and ended the week at 10811 down 0.93%. Support now comes at 10535 and resistance at its 200 dma at 11366.

With results season behind and global cues more benign, expect foreign flows to continue to drive markets upwards. The other important event in the Indian context would be the state election results due around 8/9 December. This would decide the direction of the markets and a new high around that time would definitely be on the cards.

IIP in September rose a mere 2 per cent from that a year back, compared with 0.4 per cent in August. The tepid show was mainly on account of a continued decline in output of capital goods. Meanwhile, WPI for the month of October rose to 7 per cent against 6.46 per cent in September. Sentiment was further hit after the India's trade deficit jumped in October.

Globally, the flow of money towards equity continued to see the key indices rally sharply with US, German and Japanese indices outperforming.

The rupee after touching 63.78 midweek rallied back to end the week at 63.11, after RBI Governor Raghuram Rajan talked up the rupee by indicating that the CAD (current account deficit) would be around $56 billion against previous estimates of $60 billion. Oil and gold continue to drift in a narrow range and the yields on the US 10 year paper ended the week at 2.71 per cent.

Tracking the top 3 Nifty gainers were Tata Steel up 5.5 per cent, M&M up 5.3 per cent and Dr Reddy up 2.5 per cent. While the top 3 losers were Asian Paints down 7.8 per cent, Coal India down 5.8 per cent and Gail down 5.7 per cent.

The other point of concern is the rise in yields on the 10 year government of India which traded the week above 9 per cent, and ended marginally below for the week after the RBI Governor indicated an OMO (open market operation) of Rs 8000 crore on Monday to ease the liquidity.

The recent results season saw better than expected performance from corporate India, and rerating of stocks or sectors would be in place once we see more stability on the rupee and bond yields.

The foreign institutional investor (FII) flow continued to be positive and match the domestic selling. The election results would be the other key catalyst going forward, and so "buying the dips" should be the strategy for investors keeping a slightly longer term view of 9-12 months.

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.