The Week Ahead: Markets to Remain Range Bound

The week ahead will continue to see markets range bound, as low volume and participation will keep investors on the side lines. Also high volatility seen in markets last fortnight has made the sentiment very brittle.

Last week, Dow Jones index surged above 18000 on better than expected GDP (gross domestic product) data which came in at 5 per cent. This saw a renewed bout of fresh inflows into US stocks with the US dollar surging to its best level ever, along with all major stock indices.

However locally the indices were extremely choppy, as expiry related volatility saw huge gyrations on the Nifty as foreign investors continued to be the net sellers.

The rupee also was proxy to the dollar strength and weakened to 63.8 intra-week before ending the week at 63.56/dollar. The rupee saw outflows as foreign investors sold stock and bond yields ended the week at 7.95 per cent.

The Russian currency and stock indices also saw revival and consolidated as the central bank pumped in dollar to stabilize the rouble.

Oil prices also rallied modestly as most traders felt that the fall was overdone and bought near month futures.

Nifty's recent recovery from the low of 7,961 seems to be resumption of the previous uptrend after a sharp decline in early-December. Nifty has managed to rebound back above the rising trend line thus turning the break down below 8,000 a mere whipsaw. Also, the rising channel on index persists, which indicates that the uptrend is intact. However, this does not mean that price action would reverse sharply, but it could enter into sideways pattern as action shifts to small caps and midcaps.

The top 3 gainers on the Nifty for this week were -- JSPL up 9 per cent, Ultra tech up 4.2 per cent and Bharti Airtel up 3.3 per cent. While the top 3 losers were -- Hindalco down 3.7 per cent, L&T down 2.9 per cent and Bhel down 2.88 per cent.

The Nifty ended the week down 0.30 per cent, while the high beta 'bank nifty' ended the week with gains of 0.42 per cent. However the outperformer was the CNX PSU Bank index which gained 2.13 per cent for the week.

With holiday season on the anvil, expect local mutual fund buying to continue as NAV (net asset value) propping towards year-end could see stocks outperform the Nifty. Also the nifty has found support at 8170 and could rally towards 8400 as foreign selling eases.

The recent volatility has taken some sheen of equities, as investors come to term with external risks which can escalate into sharp reversals. However, we continue to advocate as 'buy on dips' strategy as India will continue to be one of the best destinations to invest in 2015 and beyond.

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.