Foreign fund flows, derivatives expiry and updates on the Omicron variant of COVID-19 will be in focus once again on Dalal Street, in the week starting December 27. Activity in the primary market will also be in the spotlight.

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Last week, the Sensex and Nifty50 clocked a second back-to-back weekly gain, rising two percent each. IT, FMCG and pharma shares helped the headline finish the week higher, though PSU banking stocks played spoilsport.

What to expect this week

Volatility may be expected in the last week of the calendar year, with the expiry of monthly futures & options contracts due on December 30. Newsflow related to COVID cases and restrictions to curb the spread of the pandemic will be tracked closely.

"The recent volatility indicates caution that the new COVID variant might result in restriction of economic activities as its transmission rate is high despite being less severe... After the initial choppiness, global markets, the US, are settling now however it’s not the case in our markets yet," said Ajit Mishra, VP Research at Religare Broking.

He believes a decisive close above 17,150 would lead to further gains for the Nifty50, otherwise profit taking would resume. "Traders should keep a close eye on the banking index for cues," he said.

Foreign fund flow will be in focus on Dalal Street as FIIs continue to offload Indian shares. December could be a third straight month of fund outflows in India.

Technical outlook

The overall undertone of the market has turned mildly bearish, according to Yesha Shah, Head of Equity Research at Samco Securities.

"Nifty is trading within a downward sloping channel and continues to remain choppy. The Bank Nifty, which was already reflecting weakness, has broken the crucial support level and may retest the 34,000 level," she said.

Shah advises traders to maintain a bearish bias as she believes the upside to remain capped at the hurdle of 17,350. "A decisive break above this level will negate this bearish outlook," she said.

Here are the key factors and events that are likely to influence Dalal Street in the week starting December 27:

DOMESTIC CUES

Macroeconomic data

Monthly data on infrastructure output is due on Friday. Quarterly current account numbers are due on the same day.

F&O expiry

Futures and options (F&O) contracts for the month of December are due to expire on December 30.

IPO/listing

Three shares will hit the secondary market this week.

Monday: HP Adhesives

Tuesday: Supriya Lifescience

Friday: CMS Info Systems

FII flow

Fund flow will be tracked closely. Foreign institutional investors net sold Indian equities worth Rs 4,355.3 crore ($573.1 million) last week, according to provisional exchange data.

Corporate action

GLOBAL CUES

United States

Separate monthly data on home sales and crude oil stocks are due on Wednesday.

Jobs data is due on Thursday.

Europe

Monthly housing numbers will be released on Thursday.

Asia

Data on retail sales in Japan is due on Monday. Separate data on unemployment and industrial production in the country is due on Tuesday.

China's manufacturing PMI numbers are due on Friday.