As the final trading week of 2025 unfolds, market expert Vijay L. Bhambwani cautions that a combination of the monthly derivatives expiry and typical year-end lull could put a ceiling on significant market gains. In his latest analysis dated December 28, Bhambwani notes that while bulls attempted a push last week, their success was limited, setting the stage for a potentially range-bound and cautious week ahead.
Expiry Week Dynamics and Sectoral Calls
Bhambwani highlights that this week is unique due to the confluence of the January derivatives series expiry and the calendar year-end. He expects trader participation to be thin, leading to wider bid/offer spreads, which ultimately translates to lower realized profits for active traders. Against this backdrop, he identifies specific sectors that might attract attention.
Public Sector Undertakings (PSUs), especially banks, are likely to remain in focus. Additionally, with the month-end approaching, Bhambwani anticipates extended short covering in industrial metals. This activity, coupled with the existing price rise in the metals complex, could trigger bullish momentum in the stock prices of metal mining companies.
Asset Class Roundup and Global Cues
Recapping the previous week, Bhambwani points out that the Nifty 50 gained a mild 0.29% after three consecutive weeks of losses, while the Bank Nifty slipped marginally. The trigger for global market nervousness was the escalation of hostilities in Eastern Europe, which dampened hopes for a quick peace between Ukraine and Russia. This led to profit-taking in financial assets like equities and bonds and spurred unprecedented safe-haven buying in bullion.
Oil prices rose as energy infrastructure remained a target in the conflict, while gas prices fell with easing weather-related demand. The US dollar index (DXY) eased, providing a boost to emerging markets like India, though the rupee's slip against the weakening dollar spooked domestic bulls.
Risk Appetite and Technical Indicators
Bhambwani's analysis of retail risk appetite showed a robust trend last week. The high-risk, capital-intensive futures segment saw higher turnover, partly due to the approaching expiry rollovers. Within the options segment, turnover increased in the higher-volatility stock options, indicating an overall rise in risk appetite.
Key technical indicators present a mixed picture. The NSE advance-decline ratio improved to 1.51 from 1.03, signaling stronger intraday buying conviction. However, Bhambwani's proprietary LWTD (Lift, Weight, Thrust, Drag) indicator for the Nifty fell to 0.16 from 0.57, suggesting the possibility of fresh buying support may be limited. The weekly chart formed an inverted hammer pattern, indicating weakness unless the index can sustain above the weekly high of 26,236.
Outlook and Trading Strategy
For bullion, Bhambwani expects higher volatility with large intraday ranges as the stratospheric rally may see bouts of profit-taking alongside fresh buying. He maintains a long-term bullish 'big picture' outlook but advises against leveraging. In energy, oil and gas prices are likely to fluctuate due to geopolitics and seasonality, with any significant rallies likely to be sold into, given his view that markets remain adequately supplied.
Given the laid-back holiday mood coinciding with expiry, Bhambwani's call to action is clear: Initiate fresh trades with small exposure and maintain strict stop losses. He advises avoiding counters with spreads wider than 8 ticks. For the week, he estimates the Nifty to trade in a range of 25,600 to 26,500 and the Bank Nifty between 58,025 and 60,000. A sustained trade above 26,325 is needed to confirm a fresh rally, while the 25,450 level must be defended in case of declines.
