The markets bounced back smartly this week on the back of short covering and the former finance minister and present Home Minister's statement on the divestment process. The week has been extremely unpredictable and volatile for the markets. The Nifty ended up 84.45 points or 1.8% at 4796.15, after swinging 300 points during the week. The Sensex ended at 16,158.28, up 262 points, or 1.65%, after witnessing a swing of 950 points during the week.

From the index pack, GAIL and Ranbaxy were the top gainers this week, up 6.3% and 6% respectively. While Ambuja Cement, down 6%, led the losers pack. Jet Airways up 22%, RCF 21%, Torrent Power 18%, IFCI 15%, and HDIL 14%, were the top five gainers from the midcap space.

How will markets behave next week?

Mitesh Thacker, Technical Analyst, miteshthacker.com, expects the technical bounce back to continue. "We still haven’t got evidence that the market is reversing or abandoning this bounce back. Once we get past 4,825-4,840, we would head towards levels of 4,920-4,950. Volatility will be there, but it will be slightly reduced. If the market fails to get past those levels, and we see some kind of tentativeness or nervousness coming in around 4,920-4,940, it would be a signal that probably we are ready to decline again."

But Dipan Mehta, Member, BSE and NSE, expects the Nifty to trade rangebound for the next 2-3 weeks. "The market is gradually getting into a trading range between 4,600 at the bottom and perhaps 5,000 at the resistance levels. The only reason why we feel that the bottom is at 4,600 is because the global cues are improving. Also, the earnings season has not gone as well as we expected. The upsides seem to be capped at this point of time while the downside is capped on account of better global cues."

Sudeep Bandyopadhyay, Group President - Financial Services, Spice Group, too sees the Sensex trading in a range for the next 45 days. "The range broadly should be between 15,000 to about 17,500-18,000 for the next 45 days maybe till the end of December. After December 15, volumes naturally come down in the market. So, we will see a much quieter market during the next 45 days as there is lack of fresh triggers."

Sectors to look at:

Among sectoral indices, the BSE PSU, Realty, and Metal index gained the most this week at 4.7%, 4.35%, and 4.07%. Bandyopadhyay advises investors to selectively start buying shares. "If you have a 3-4 month holding appetite, then you should selectively buy stocks in sectors which look attractive. There are opportunities of value buying in this market, post the corrections of the last 2-3 weeks. If you have a very short-term outlook, then you have to be cautious and you have to keep a tight stop loss and trade within a range."

On technology:

IT stocks are a buy for Bandyopadhyay. "A whole lot of fundamental factors have started favouring the technology sector once again. Demands for IT services have gone up. The US continues to be their largest market. The US economy and the GDP have started moving up and the demand for their services has started moving up, so all the tech companies will have a good orderbook position. But they need to manage the dollar thing very carefully. I think technology as a sector could outperform."

On sugar:

Thacker sees sugar stock consolidating going forward. "Sugar, fertiliser, and tea stocks all move in some kind of tandem or correlation. Fundamentally, there is lot of good news on sugar prices. These stocks on dips will get good support, so these stocks will keep bouncing back. But after the kind of rally which we have seen, it could be a broader consolidation for these kinds of stocks."

On FMCG:

Bandyopadhyay continues to remain bullish on FMCG. "The sector continues to remain in focus due to market volatility and because of the fact that domestic consumer demand continues to remain strong. There are opportunities of a still very safe play in the FMCG sector."

On telecom:

Telecom stocks are an avoid for Mehta. He feels investors are better off buying these stocks 20-30% higher. "If the market were to rally beyond these levels, then telecom should also rally. If you see markets going up by 4-5%, then you could perhaps get a 10-15% rally in telecom. But from a fundamental point of view, valuations are getting attractive, but there remains far too much uncertainty. Maybe three months down the line when we have the next quarterly numbers, that would give us certain handle on what the earnings will be post this particular price war. At this point of time, there is a bit of confusion and investors may be better off buying maybe 20-30% higher. But there should be more clarity as to what the perfect margins would be and what the eventual volume growth would be."