With the markets on the cusp of the year, sandwiched between two big weekends - the Christmas and the New Year, everyone seems to be in a holiday mood.
Hence, one should not expect huge amount of action in the market since the global funds and domestic traders may be out of the market for now. Global cues, therefore, have been soft.
One can expect rangebound sessions for the market though there is an F&O settlement pitted in the middle of the week. Due to the derivatives contract expiring, markets could witness bouts of volatility.
Over the weekend, the positive collections on advance tax, which are substantially higher than the government's budgeted figure by Rs 35,000 crore (Rs 350 billion) could give the government some freedom to think more in terms of expanding the economy in a significant manner.
Over the month of December, there have been significant corrections and this could augur well for the markets in 2007. Traders, at the moment, will be light in terms of their positions. Hence, when the corporate earnings are out, the market would wait for a new direction and traders will be able to take fresh positions.
Markets should also see good amount of money flow in the first half of 2007. Comments Deven Choksey of KR Choksey Securities, "I see a good sustained momentum as regards to the funds coming into the market."
In this low activity week, which are the sectors and stocks that show a lot of promise going into 2007? Sectors, such as telecom, metal, real estate and infrastructure could be the best bets at the moment.
In the light of the advance tax numbers, Choksey suggests that the pharma companies like Cipla have paid good amount of advance tax. He also finds good advance tax numbers in the metal and realty space. According to him, stocks in these sectors where they have been good amount of tax, suggest that in Q3, the earnings will be better and the direction should be positive for Q4 as well.
He further adds, "In my view, one will have to be very selective as far as the market is concerned because the overall sector may not give the kind of momentum as far as growth in the portfolio is concerned. But I think individual stock specific action should yield good results for the fund managers and the investors."
Sudarshan Sukhani of trendwatchindia.com finds a lot of prospect in the midcap IT space. He mentions, "The midcap IT space promises a lot of potential, which is far better that it might actually substantially outperform the big majors in IT. So as such, I would assume that this sector is the first and foremost choice for all traders and for investors looking for a short-term trade."
Therefore, a lot of people would want to preserve their gunpowder for January since that is when the action really heats up before earnings and expectations of more flows coming in.
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