What is your view for the stock markets on 27th December after the Nifty and Sensex gained in the previous week?

On the Friday last week, the markets tapered after a continuous 3-day rally. Both the Nifty and the Sensex tapered from higher levels. While the Nifty closed at the 17,003 levels the Sensex closed at 57,124. The selling was quite intensive in early trades on Friday. However, the indices managed to recover ground in the second to closed with subdued losses.

In terms of market dynamics, the advance decline ratio was unfavourable at 11:39 even as the India VIX edged marginally higher to 16.03 levels on Friday. That is still a fairly comfortable level and hints at buy on dips. The big gainers on Friday were the IT stocks with pharma and FMCG also among the defensive outperformers during the week.

Foreign investors net sold Rs.715 crore in equities while domestic funds and LIC sold Rs.44 crore in equities on Friday. FPIs are likely to remain subdued till year end. In global market cues, US markets were shut on Friday but Europe ended flat while the SGX Nifty is up nearly 25 basis points in early trades on Monday. For now, Nifty downside may be at 17,000.

The big even in the last week will be the last F&O expiry of the year on 30 December and it remains to be seen if there is a surge in long unwinding on the expiry day. Also a more important metrics will be if the long positions get rolled over to the next series, as that would show the confidence in long positions for the next month.