F&O expiry, FPI selling among key factors that may guide market this week

Last week, the market closed flat after volatile moves on either side. The movement was dictated by surging Covid-19 cases, especially the Omicron variant, across the world. Some bottom fishing by investors also lifted Street’s spirit.

Consequently, Nifty managed to settle above 17,000 level. Among the sectoral pack, defensives like IT, FMCG and pharma did well while others remained under pressure. The broader indices witnessed a mixed trend, wherein the midcap index ended with a cut of a percent while smallcap closed on a flat note.

“The recent volatility indicates caution that the new Covid-19 variant might result in restriction of economic activities as its transmission rate is high despite being less severe. We advise maintaining a cautious approach and waiting for further clarity. Traders should keep a close eye on the banking index for cues,” said Ajit Mishra, VP Research, Religare Broking.

Below are the factors that are likely to guide market this week:


Covid-19 restrictions
Traders will keenly watch any fresh restrictions on movement by authorities. Many states in the country have started imposing curbs, including night curfew. In Europe, some nations have already placed restrictions on their people. UK, US and other Western nations are reporting a record number of cases.

IPO listings
Though there won’t be any fresh issues to bid for, three companies will get listed on the bourses. Adhesives and sealants company HP Adhesives will make its debut on the bourses on December 27, followed by pharma company Supriya Lifescience on December 28 and cash management company CMS Info Systems on the last day of the year.

FPI selling
Foreign investors continued their unabated selling last week, a trend seen in the last three months. They have withdrawn Rs 17,825 crore so far in the month. Analysts project it may continue, though the quantum of selling will likely be lesser. Nonetheless, it will continue to have negative pressure on the market.

F&O expiry
The December futures and options contracts will expire on Thursday, which may induce volatility in the market, given traders will either rush to square their positions or roll that over. Rollover data will also be crucial as that will show how bullish or bearish traders are on the prospect of the market.

Technical outlook
Nifty is now trading within a downward sloping channel and continues to remain choppy. Bank Nifty, which was already reflecting weakness, has broken the crucial support level and may retest 34,000. The overall undertone of the market has turned mildly bearish.

“Traders are advised to maintain a bearish bias as the upside is likely to remain capped at a resistance of 17,350. A decisive break above this level will negate this bearish outlook,” said Yesha Shah, Head of Equity Research, Samco Securities.