Though positive global cues helped the Indian markets to commence the week on a positive note, profit booking at higher levels as against the marked lack of fresh triggers marked the trend for the week.

Sectoral rotation remained the key trend along with strong stock specific action. Realty stocks that had been out-performers close to the penultimate trading sessions in the previous week faced selling pressure, while the hitherto underperforming Auto sector bounced back in the first half before losing steam again towards the end.

Banking stocks, especially PSU banks and more specifically the shares of State Bank of India and its associate banks surged after introduction of the bill by the Finance Minister to allow them to raise more capital from the market. Notably, the upmove was triggered after the Government sought parliamentary approval to cut its stake in SBI to 51 per cent. However, it too cooled of from higher levels as profit booking soon emerged.

The primary market action also weighed on the sentiment. After having announced the price band announced for the NMDC FPO, the stock remained on the sellers radar and lost almost 15 per cent during the week from its weekly high. The response from the retail category in this PSU disinvestment too remained subdued. Meanwhile, the IPO’s of Texmo Pipes and Man Infraconstruction which were relatively small sized listed strongly and closed with a premium of 34 percent and 45 percent respectively. 

Overall, across the board buying (in the earlier trading sessions) indicated that there was still some steam left. Resultantly, despite showing signs of exhaustion, the markets rallied to breach key technical and psychological levels.

Notably,  Mid-cap and Small-cap stocks faced higher selling pressure and underperformed the broader markets on a weekly basis.

Increase in volatility near the end of the week gave traders more room to play as the markets threatened to breakout of the sideways consolidation range. However they could not sustain higher levels, just like global markets which too seemed to be struggling to find sustainable positive triggers.

While the week gone by was witness to relatively  lower levels of volatility till the last couple of sessions, the sense of discomfort at higher levels in both, domestic and global markets promises to make the week ahead a more volatile one.

Though the commencement of the week will be highly influenced by the Advance Tax numbers, the post budget rally seems to have also factored in the same to a great extent.

Unless there is a strong positive surprise, the markets may react indifferently as they did post the announcement of the IIP numbers on Friday.

Stock specific action and sector specific churning would continue though these higher levels merit more caution.

High risk traders can initiate contrarian positions with a strict stop loss at higher levels. As long at the markets (the Nifty) continues to trade below 5,180 – 5,200, fresh shorts can be initiated albeit with a strict stop loss above these levels on a closing basis. Notably, there is strong support at 5,100-5,080 levels on the downside.

For investors, as the global market indicators appear inconclusive and the domestic triggers too are drying up, they can consider a ‘wait and watch’ approach and avoid investing heavily in the market till a correction sets in.