The Nifty and Sensex each gained a percent in the last week. Global rally on easing tensions between Federal Reserve and White House and likely positive talks between US and China lifted investors' sentiment.
The Nifty has been swinging in a 500-point range for around a month now. Whenever the index goes to near 10,900 or psychological 11,000, it sees some profit booking which pulls it down to around 10,500.
The consolidation may break out strongly on either side once the market starts pricing in October-December quarter earnings which will start in the second week of January, experts said. Futures and options data suggests, the index has strong resistance at 11,000 and support at 10,500.
"The domestic sentiment remained optimistic with reports that the government is contemplating several incentives for farmers ahead of the 2019 Lok Sabha elections. Investors will closely track global economic outlook, movement in crude oil and currency along with Q3FY19 earning season due in January," Hemang Jani, Head - Advisory, Sharekhan told Moneycontrol.
He believes long-term investors can use volatility in the market to their advantage and maintain a stock-specific approach.
"For the coming week, 11,040, which is 38.2 percent retracement projection of previous week range, will act as a major resistance level and decisive breakout could further strengthen the bulls till 11,218 and 11,316," Manali Bhatia, Senior Research Analyst at Rudra Shares & Stock Brokers said.
On the other hand, support for the week exists at 10,715 and 10,540, she added.
The broader markets also traded in line with benchmark indices in the last week of the year, with BSE Midcap and Smallcap rising around 0.9 percent each.
In the past week, 300 stocks out of BSE 500 closed in the green. Moreover, 200 stocks gained more than 1 percent and top 10 stocks registered a double-digit return.
Ruchi Soya, Arrow Greentech, Indo Rama Synthetics, Selan Exploration, CMI, Nitin Spinners, Ruby Mills and Mohota Industries were amongst top 10 stocks, which rallied between 10-39 percent during the week.
The trading volume is likely to be thin in the coming week as FIIs, institutional investors and traders generally go on a holiday to celebrate Christmas and New Year. Globally it is going to be a truncated week as markets will be closed on January 1, but Indian markets will remain open for the entire week.
"After a highly volatile December expiry, the focus will shift on macroeconomic data and developments in the winter session of parliament which ends on January 8," Rahul Sharma, Senior Research Analyst at Equity99 told Moneycontrol.
He said market participants would look forward to auto sales numbers for the month of December 2018 next week as that will be a key indicator of an economic slowdown. "Monthly sales numbers will also be crucial because of a tepid festive season for four-wheeler industry."
Nikkei Manufacturing PMI and Nikkei Services PMI for December will also be announced in the coming week.
The first half of 2019 is likely to be volatile due to Lok Sabha elections, but the second half is expected to be driven by earnings and macro factors, experts said. They further expect it to be the year of midcap and smallcap after correction of 15 percent and 25 percent in 2018 respectively.
"Midcaps and smallcaps have seen a sharp correction in 2018 and several companies with solid fundamentals are available at much more reasonable valuations now. Given the overall robustness in earnings recovery, 2019 could well be a year of midcaps and smallcaps," Harendra Kumar - Managing Director, Institutional Equities at Elara Capital said.