Rangebound Trade, Volatility Likely In Markets As Year Comes To A Close: Analysts

Domestic stock markets ended the holiday-truncated week nearly unchanged on Thursday, but the S&P BSE Sensex index registered a record closing high. The 30-scrip index ended 529.36 points, or 1.14 per cent, higher at a record 46,973.54 on Friday, whereas the broader NSE Nifty 50 benchmark climbed up 148.15 points, or 1.09 per cent, to settle at 13,749.25, 11.3 points shy of a record high of 13,760.55 last week. 

Both indices ended the week on a flat note. The Sensex added 12.85 points, or 0.03 per cent, but the Nifty declined 11.30 points, or 0.08 per cent, for the week. That followed seven weekly gains in a row.

IT and pharmaceutical shares continued to rise, with the sectoral gauges on the NSE up 3.23 per cent and 1.15 per cent respectively. Cipla, Wipro, Infosys and Sun Pharma, rising 3.11-5.19 per cent each, were the top gainers in the Nifty basket of 50 shares. 

On the other hand, the Nifty Bank and PSU Bank indices dropped 1.02 per cent and 3.50 per cent respectively. ONGC, IndusInd Bank, Hindalco and Bharat Petroleum, declining between 4.20 per cent and 6.11 per cent, were the worst hit among 32 laggards in the index. 

Analysts say some correction cannot be ruled out in the near term, as foreign institutional investors halt fund infusion into Indian capital markets during holidays.

Foreign institutional investors (FIIs) have fuelled the recent rally in the domestic markets, having net invested Rs 62,648 crore into Indian capital markets so far this month, including Rs 56,643 crore in equities alone, according to NSDL data. With this, December is on track to become a third straight month of net inflows into the capital markets.

Optimism around COVID-19 vaccines and a fast recovery from the pandemic-caused global slowdown is driving FII inflows and the resultant gains in domestic markets, say analysts. 

"With the New Year at our door step, the markets are likely to trade in a rangebound manner with 13,750-13,800 levels on the upside and 13,100-13,200 levels on the downside. Going ahead, bourses may witness enhanced volatility and drying up of liquidity as the new margin norms set-in," said Nirali Shah, senior research analyst at Mumbai-based brokerage Samco Securities.

"Investors should keep an eye on private sector lenders which are currently consolidating and can be accumulated on minor dips," she added. 

Meanwhile, global cues are expected to drive market sentiment.

Britain and the European Union clinched a free trade deal on Thursday, sending MSCI's world equity index 0.19 per cent higher. Britain hammered out the final details of a narrow agreement with the EU just seven days before it exits the trading bloc.

Hopes of further stimulus in major economies to battle the fallout from the coronavirus pandemic are also driving the optimism, say analysts.