Mumbai: A sign of consolidation is likely to greet Dalal Street next week as the bellwether Sensex, which touched its six-month high level of 11,403 points last week, is expected to witness a correction as anticipation of election results will weigh on the market, analysts say.
“This week will be a real test for the market to see whether this eight-week-old rally pauses for breath or continues its upward journey. It is petering out and is likely to correct itself before deciding what next.
“Also, the election results will be out within two weeks and that could bring about some uncertainty in the market,” Kejriwal Research and Investment Services Director Arun Kejriwal said.
Analysts said domestic institutional investors may book profit next week as the broader indices including BSE Small and Mid Cap index closed in the negative last week with losses of 0.14% to 3.13%.
“Markets have fallen across sectors, but a late bout of short covering and fresh buying saw the Sensex gain and close positive. Market is looking heavy as investors might resort to profit taking to cash in on the past eight week’s counter rally,” Kejriwal added.
The BSE Sensex gained 74.20 points in the past week and closed at 11,403.25 points, while the National Stock Exchange’s Nifty index ended with a loss of 6.80 points at 3,473.95 points.
The results of the 15th Lok Sabha elections are slated to be announced on May 16. Marketmen said with just two more rounds of voting to go, people in the market would now start playing for results and post-result scenario.
“Investors may sit on cash for the next 10 days. Trading may become lacklustre before the poll results,” Kejriwal said.
Worldwide stock markets witnessed a strong rally in April, with the BSE Sensex surging 17 per cent - the best in 10 years - and the Dow Jones World Index jumped 12 per cent, the largest monthly gain since it began in 1991.
“The momentum of gain will hold in the first-half of May. There will be bouts of volatility as election results will weigh on the investor sentiments,” SMC Global Vice President Rajesh Jain said.
On Friday, the US market ended in the positive zone with the Dow Jones Industrial Average gaining 44.29 points to 8212.41 and the Standard & Poor’s 500 Index rising 0.54% to 877.52 points.
Besides, institutional activity increased during the week as Foreign Institutional Investors were net buyers to the extent of Rs 365 crore, while Domestic Institutions were net sellers of Rs550 crore worth equities.
Further, analysts said that developments in the world market would also drive the Indian markets as the result of the ‘Stress Test´ on the 19 major banks in the US and Swine flu could take its toll on global markets.