Be cautious and use volatility to make money

Markets will remain buoyant and scale new heights this week. The Sensex and the Nifty has breached 30,000 and 9,000 points respectively last week.

The key driver would be news form Parliament, where the government is set to introduce key Bills.

Besides, macroeconomic data, foreign investment and crude oil price trend will dictate the trend. Factory output data for January and consumer price index (CPI) figures for February would be declared on Thursday.

Last week had a volatile Wednesday which saw markets scale new highs followed by the inevitable correction. The Sensex gained 431 points intraday, then lost 739 points before closing in the red with a net loss of 213 points.

The Nifty gained 123 points and lost 225 points intraday before closing with a net loss of 73.6 points.

Clearly, the volatility was unprecedented but showed that weak hands were entering the market but were stopped the very same day. Despite the volatility, markets eked out small gains for the week and closed positive after the Budget presentation.

Dow Jones closed at 17,856 points, a weekly loss of 276 points, or 1.52 per cent. The European Central Bank will start buying bonds from Monday under its quantitative easing programme.

Foreign institutional investors continued to be buyers last week purchasing equity worth Rs4,200 crore and Rs 8,900 crore in February. Domestic institutions were buyers of equity worth Rs 795 crore during the week and Rs 4,750 crore in February.

State Bank of India, the country's largest lender, is expected to tap the capital markets with its follow-on-public offer in the week beginning March 16.

In conclusion, markets this week will reach new highs but would witness customary corrections as well. Trade cautiously and use volatility to make some money.

(The writer is an investment analyst)

Courtesy: Mail Today