Jayant Manglik of Religare Broking said further profit taking in the index could be seen and that could cascade on broader front too.
The market gained for a fifth consecutive week as bulls retained their charge, but trimmed weekly gains due to some selling pressure in the later part of the week.
Benchmark indices digested the Federal Reserve's move of holding rates and indicating no rate hike in 2019, but got caught in a bear trap due to profit booking and Fitch Ratings' cut of India's FY20 growth forecast.
It was more of a consolidative week for the market, which indicated that a rangebound move could continue and some profit booking can't be ruled out given the rally of 3,000 points seen on the Sensex and March derivative contracts expiry in the coming week, but overall sentiment remains positive amid strong FII flow experts said, adding the consolidation is always healthy for bull run.
"Markets are likely to remain volatile for the week ahead as fresh triggers look weak going forward," Jimeet Modi, founder and CEO at SAMCO Securities and StockNote told Moneycontrol.
Jayant Manglik, President - Retail Distribution at Religare Broking, also said further profit taking in the index could be seen and that could cascade on broader front too. In case of decline, 10,350-10,250 zone would act as cushion.
He advised traders to utilise any dip to accumulate quality stocks, considering the overall bullish trend, while Jimeet Modi advised investors to wait for a correction from the current levels before getting FIIs' hands on select quality stocks.
The broader markets snapped four-week winning streak with the Nifty Midcap index falling over 0.7 percent. Among sectors, Nifty Realty outperformed (up 6 percent) while Auto lost most (down nearly 5 percent).
Here are 10 key things that will keep traders busy this week:
The consistent inflow of FII money kept the market momentum strong for more than a month now and is unlikely to stop given the hope of stable government at the Centre and likely stimulus from major global central banks to boost economies.
FIIs bought more than Rs 43,000 crore worth of shares including nearly Rs 28,000 crore of buying in March itself and helped the market when DIIs turned net sellers partly due to year-end redemption pressure.
The international markets are grappling with their own issues, which makes India more attractive than any other global counterpart, experts said.
"We do not see any stop to FII flow in the near term. If PM Modi forms the government again, FIIs will continue to be net buyers in the market from hereon for the rest of the year," Foram Parekh, Fundamental Analyst – Equity, Indiabulls Ventures told Moneycontrol.
After the clarity on the election results and earnings pick up, she feels FIIs will do historic investments this year.
Domestic institutional investors have been net sellers in February-March after pumping in big chunk of money for last many quarters, but that does not mean they are bearish on the market. In fact they have been sellers due to year-end redemption pressure.
Since the financial year is coming to an end, liquidity, at least from the debt markets, will seep out. Some amount of redemption is likely to put pressure wherein domestic institutions are expected to remain net sellers," Jimeet Modi, founder and CEO at SAMCO Securities & StockNote told Moneycontrol.
Foram Parekh said she does not see the lack of participation from the domestic institutional investors (DIIs) as a threat to the market outlook.
"DIIs have been buying continuously from 2017 which makes sense to do some profit booking at higher levels," Parekh said.
DIIs, so far, net sold Rs 13,500 crore worth of shares in March in addition to Rs 566 crore of selling in February.
General elections, the key event of 2019, will continue to be keenly watched by Dalal Street. The sentiment and latest opinion polls, so far, indicated that the ruling party is expected to form the government again but everything is depend upon final results which is scheduled to be announced on May 23 after polling is over during April 11-May 19.
Most parties announced their candidates list in the week gone by and more lists are yet to be announced.
Market typically reacts to this event for short period of time and in longer term it looks at only earnings and economic growth, experts said.
"The current rally in the market is discounting sweeping win of the current government. The trend is very positive until the election result is out. If the current ruling party wins the elections, Nifty will touch 13,000 mark during the year on account of earnings recovery, lower interest rates and a stable government," Foram Parekh said.
Rupee and Crude
The rupee has completely been favourable to India, backed by consistent flow of foreign money and hope of continuity in government policies for another five years.
In the week gone by, the currency gained 15 paise to close at 68.95 against US dollar, continuing appreciation for sixth consecutive week.
Weakness in dollar as well as huge flows in domestic equities and debt markets have aided rupee gains.
Analysts said that despite a fall in the rupee, it still remains the "best performing emerging market currency over last one month gaining over 3 percent".
"Upcoming RBI monetary policy meeting assumes significance in the backdrop of a decline in global yields as well as relatively low domestic inflation. USD-INR has key resistance at 69.50 while 68.30 is a near term support," Amit Gupta of ICICI Direct said.
Oil price continued to support Indian markets as it has been stabilised below $70 a barrel for the last few months. If it remains at around current levels, then it may not be a big concern, experts said.
Brent crude futures, the international benchmark for oil prices, continued to be rangebound around $67 a barrel for last few sessions, but gained more than 30 percent since December 2018.
"Hence going ahead there is probability of profit booking however, the undertone is bullish due to OPEC's firmness to support prices," Jigar Trivedi, Research Analyst- Commodities Fundamental at Anand Rathi Shares & Stock Brokers told Moneycontrol.
Lastly, US-China trade will be theme for coming week as US trade representative & treasury Secretary are going to meet Chinese counterpart in Beijing, he said.
India's external debt data for December quarter will be released on March 28. External debt declined to $510.4 billion at September-end.
Government budget value and infrastructure output for February, and current account for Q4CY18 will be announced on March 29.
On the same day, foreign exchange reserves for week ended March 22, and deposit and bank loan growth for the fortnight ended March 15 will be released.
The Nifty50 formed a bearish candle on daily charts on March 22 and 'Doji' kind of pattern on weekly scale after sharp rally in previous weeks, which indicated that there could be some consolidation along with profit booking in coming sessions, experts said.
"A doji or a high wave type candle pattern was formed in the Nifty as per weekly time frame chart. The formation of such weekly pattern, post sharp up move of previous week could signal a possibility of consolidation or minor downward correction for the next week," Nagaraj Shetti - Senior Technical and Derivative Analyst at HDFC Securities told Moneycontrol.
Hence he said immediate supports to be watched at 11,410 levels.
Shabbir Kayyumi, Head of Technical Research at Narnolia Financial Advisors also said a bearish candlestick pattern which suggests halt in upmove and reversal of the trend in the short term.
"As long as Index is trading below today’s pivot point placed around 11,525 levels, the possibility of filling gap placed in between 11,343-11,370 cannot be ruled out, while a decisive close above 11,525, will resume upmove," he added.
On the Options front, maximum Put open interest (OI) is at 11,000 followed by 11,200 strike while maximum Call OI is at 11,600 followed by 11,500 strike.
Put writing is at 11,600 followed by 11,450 strike while Meaningful Call writing is at 11,600 followed by 11,500 strike.
Option band signifies a trading range in between 11,300 to 11,600 zones, experts said, adding that volatility fell from highs but slightly moved from its base of 14 zones so some volatile cues could be seen.
"From derivative markets, we decipher long build up in the Nifty Futures', short covering in the Bank Nifty Futures', Put writing at 11,300-11,500 level and FIIs' buying in the Index futures' segment. These cues indicate that one should remain optimistic for the coming March Expiry week with the stop loss of 11,300 levels," VK Sharma, Head PCG & Capital Markets Strategy, HDFC Securities said.
The markets no doubt are in an overbought zone, but they can be overbought for a longer period of time than short sellers can be in business, he added.
"The next logical resistance for the markets is at 11,760, the all-time high mark, the Nifty seen saw in August last, he said.