Markets set to face volatile trading in run-up to Union budget

The benchmark Nifty could see wild price swings when stock markets reopen on Tuesday, coinciding with the weekly expiry of index options.

- Ram Sahgal

The Nifty closed below its key 200-day moving average, which analysts view as a bearish signal.

(BLOOMBERG)

This comes amid divergent views on market direction in a truncated week—shortened by the Republic Day holiday on Monday—leading up to the Union budget on 1 February.While some analysts expect the downtrend from earlier this month to continue, with the Nifty breaking below its crucial 200-day moving average amid persistent foreign portfolio investor (FPI) selling and a falling rupee, others believe the benchmark is close to bottoming out and could stage a bounce.

A potential rollback of punitive US tariffs on Indian imports and the Reserve Bank of India's (RBI) ₹2 trillion-plus liquidity measures announced on Friday are being cited as possible triggers for a reversal.

Investors will also track moves by foreign portfolio investors this week. FPIs sold a provisional ₹4,113.38 crore in cash on Friday, per BSE and NSE data. They also raised their cumulative bearish bets on index futures to a record 227,533 contracts, despite the extended weekend.

Friday's selling has taken their cumulative net sales in the current fiscal year through 23 January to ₹1.9 trillion, per depository and exchange data. In the previous year (FY25) their secondary share sales stood at a record high of ₹2.48 trillion.