Week Ahead: Market likely to see cautious trades; Some volatility likely ahead of F&O expiry

After seven successive weeks of gains, the Indian stock market may well see some correction in the coming week. There are no big negative news as of now and this could limit the market's downside risk to a notable extent.

Investors were seen lapping up stocks amid hopes the central bank would start cutting rates sooner than later following a sharp decline in headline inflation. Some solid earnings reports from India Inc too aided sentiment. Heavy buying by foreign institutional investors kept the market floating in the bull orbit for most of the week.

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However, with the reporting season almost over, there may not be any significant positive triggers from India Inc. The mood, for the better part of next week, is likely to be cautious. Stock prices are expected to move in a tight band for a major part of the week. However, some volatile spells are likely ahead of expiry of February series derivatives contracts on Thursday, 23 February 2012.

Though news out of Europe over the past few weeks turned out to be a bit positive at times, concerns about the financial situation in Greece and several other parts of the eurozone still persist. However, with the Chinese government pleding its support to pull Greece out of the debt trap and amid talks of a second bailout for the debt-ridden country gaining ground, global markets saw some hectic buying almost right through the week ended 17 February 2012. Some upbeat economic data from the U.S. too contributed substantially to the gains.

The market will open the week on Tuesday - there will be no trading on Monday due to a holiday for Maha Shivratri - with investros reacting to the outcome of the meeting of eurozone finance ministers in Brussels on 20 February. With the IPO of Multi Commodity Exchange opening on Wednesday, volume of business may turn out to be bit thin at times.

Oil stocks will be in focus ahead of the Group of Ministers' meeting on considering changes in the gas allocation policy. The empowered group of ministers are scheduled to meet on Friday.

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Several market watchers and analysts believe that the market is in a somewhat overbought position and that a correction is not far off. However, considering the massive buying by foreign institutional investors since the beginning of this calendar year, the market may not cave in meekly to any pressure, at least in the very short run.