What is your view on the stock market for Monday 31st January? Will there be a pre-budget rally on Monday?

For the previous week, the Nifty and Sensex fell by over 3% while the mid-cap indices and the small cap index fell over 4%. FPI selling was the big story after the Fed statement was more hawkish than anticipated. The worst hit by the sell-off was the IT Index, which fell 8% with most of the IT heavyweights having lost 15-25% from their recent peaks.

Even as the markets overall remained chaotic, the volatility index as measured by the VIX appears to be tapering down towards the 20 levels. Even the Advance Decline ratio was positive at 31:19 on Friday. Overall, the markets will await the Economic Survey but the falling operating margins will be a big concern for markets during the quarter.

Foreign investors sold Rs.5,045 crore and domestic funds bought stocks worth Rs.3,359 crore on Friday. FPIs have sold over Rs.28,200 crore in equities in Jan-22 till date. In global market trends, the Dow closed 565 points higher and NASDAQ 418 points higher. Europe was in the negative while the SGX Nifty is trading with 77 bps gains in early trades.

While the Economic Survey will be keenly awaited on 31-Jan, it is tough to think of any pre-budget rally. This is going to be a tough budget as the government has to grapple between rising spending demands and fiscal deficit concerns. Also, political compulsions may push the government towards a more populist budget this time around.