Traders likely to book profit after rally, buy on corrections: Experts

MUMBAI: Savvy traders may look for opportunities to book profits this week after the BSE Sensex surged over 2000 points, or 7%, in the past seven trading sessions, but any market correction will be short-lived, said analysts. What's worrying investors though are Greece election results, US Federal Reserve meeting on monetary policy, and futures and options (F&O) expiry.

"If election results in Greece disappoint, then Indian markets can see a 3-4% correction. Having said that, investors should use the correction to buy stocks, as the bounce-back will also be sharper than expected," said Kunj Bansal, executive director and chief investment officer at Centrum.

Greece has been grappling with political uncertainties for a while, including a possible exit from the eurozone, which will create an unrest in other countries like Portugal and Italy as they too are under pressure to revive their economies, said analysts. "Volatility in Indian markets will be relatively less when it opens on Tuesday than in other European markets on Monday, as investors will have time to assess the damage. On the other hand, if Greece election results throw up a surprise result, then Indian markets will extend their rally," Bansal said.

Obama Visit

Investors will be keenly following events during US President Barak Obama’s three-day visit to India to be the chief guest for the Republic Day celebrations. They will hoping to see strategic tie-ups in sectors such as defence, nuclear, infrastructure and renewable energy.

"Many companies in sectors as diverse as defence, pharmaceuticals, software, nuclear energy and infrastructure are expecting a solid push from the deliberations between President Obama and PM Modi," Ajay Bodke, head - investment strategy and advisory at Prabhudas Lilladher, said.

"Various sectors will react to Obama's visit and on the promises he makes. Moreover, steady FII inflows and hopes of reforms in the upcoming budget will keep the spirits on Dalal Street high. Any correction, if at all, will be shortlived," said Amar Ambani, head of research at IIFL.

However, market volatility is expected this week as traders will roll over, or carry forward, their positions in the futures & options (F&O) segment from the near month January series to February series. Nifty futures continued to see long build-up from FIIs with long/short in index future ratio moving to 6.46 times levels. But put to call option ratio (PCR) has moved towards 1.33 times levels, with heavy put writing visible across the strikes, suggesting short-term pressure on the markets.

"We expect Nifty to go through a consolidation phase and be volatile in the 8600 to 9000 range over the coming week. However, the overall bias would remain on the positive side, so any decline should be used to initiate fresh long positions," said Jayant Manglik, president - retail distribution, Religare Securities. "Among the sectoral indices, we would advise investors to bet on banking, infrastructure and pharmaceutical stocks, and be extra cautious while selecting stocks," Manglik said.