The week ahead: Markets to correct further as exhaustion sets in

The week ahead should see the markets correct further as weak global cues and "vertigo" effect of vertical rise catch up.

The markets clearly seemed overbought and despite huge foreign buying succumbed to heavy profit booking by local institutional selling.

The Indian markets closed the week on a flat note after touching ninth record high on Thursday, with the Sensex mildly up by 0.09 per cent while the Nifty slipped by 0.02 per cent.

Technically, the Nifty failed to breach the 6770-6800 levels and have made a double top around those levels. The Nifty now faces resistance at 6770 and finds support at 6580. The high beta "bank nifty" could not break the 13000 barrier and now faces resistance at 12850, while it finds support at 12123. The real outperformer was the CNX Reality index which ended the week with gains of 6.7 per cent.

With the central bank leaving rates unchanged the market hit new highs in Thursday but failed to sustain, and profit booking and weak global cues saw indices closing flat. The other cause of concern was the sharp spike in bond yields. The 10 year paper suffered its biggest weekly loss since week ended November 8th and closed above 9 per cent.

Global cues turned negative as the Russian crisis is seeing rating downgrades on the bond/debt market and forcing large corporates to scramble for cover. This saw further collateral damage to the currency and spread to parts of Europe.

The next week will also have polling start in the 1st phase locally, which will see markets react to electoral trends & rumours.

Tracking the top 3 gainers in the Nifty were Jindal Steel up 6.7 per cent, Tata Steel up 5.4 per cent and Hindalco up 5.1 per cent; while the top 3 losers were BHEL down 8.3 per cent, Gail down 5 per cent and ITC down 3.8 per cent.

The Nifty now seems in a narrow range till clear verdict on the electoral results, however the real action is now in the under owned midcap sectors/stocks where price movements are large and volatility is high.

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.