The curtailed trading week ahead will see high volatility during intra-day as well as intra-week. Profit-taking and continuous overseas fund flow will pull the market in different directions. Besides, expiry of February month contracts in futures and options segment this week, will add its dosage of uncertainty to the market. The market is closed on Monday due to Mahashivratri.
Though most market participants are awaiting correction, it is still elusive on account foreign investors' buying. FIIs have so far pumped in about Rs 25,000 crore into Indian equities since the start of the year. As a result, the Indian stock market turned one of the best performers in this calendar year so far. But the moot question is how long the funds will enter Indian shores from the West?
Already there are some signs of slowing. According to fund tracker EPFR Global, emerging market equity funds attracted $2.19 billion in new cash, less than half of the previous week's 68-week high of $5.8 billion. Still, these funds have seen seven straight weeks of inflows.
Fund managers' bullish
According Bank of America-Merrill Lynch's recent survey, 44 per cent of global asset allocators are overweight on emerging market equities, up from 20 per cent, in January. “This is the largest month over month jump since 2001, and is the highest reading since December 2010. Global emerging market has now reclaimed its position as the most-favoured region,” said the survey of global fund managers.
However, the absence of improvement in the real economy may keep the broad market under leash. The domestic macro economy is yet to show sign of stability.
Citigroup in its recent research report (February 16) said: “The Indian market, at 18,154 on the Sensex is almost at our fundamental December 2012 target of 18,400. We are holding our target. We would continue to position our portfolio relatively aggressively and for risk (and stay away from defensives): see overshoot risks on the upside rather than the downside. But we believe the markets' move now prices in a quickly recovering economy/corporate sector; this will likely take time (3/4 QFY-13), and the market will likely wait for most 2012 for the economy to catch up.”
Global developments following the Greek austerity drive will also be closely watched. “Euro zone finance ministers look set to approve a bailout package for Greece on Monday although final details are still being worked out,” said Austrian Finance Minister, Mr Maria Fekter.
Several market participants believe that Indian market looks overbought and there could be some short-term correction. However, several mid- and small-cap stocks will be in traders' focus.