Market to remain steady to firm on FII inflow

Continued FII inflow may keep the market firm. However, a section of the market advocates caution as the market has run up sharply over the past few months. The market has been witnessing an uptrend since late-July 2006. The Sensex is up almost 40% in calendar 2006, so far.

Small-cap and mid-cap stocks may remain in focus. There has been a surge in small-cap and mid-cap stocks on a selective basis since the past few days. Market men say that small-cap and mid-cap stocks are catching up with the surge in blue-chips since the past few days.

FII-inflow in calendar 2006 so far has reached $7.14 billion. The inflows are strong, coming on the top of record annual inflow of $ 10.7 billion in 2005. The inflow totaled $6.59 billion 2003 and $8.5 billion in 2004.

The fund-flows into India are due to strong earnings growth of India Inc coupled with increasing recognition of India’s long-term growth prospects. India’s growth drivers are a favourable demography (large share of young population), robust domestic consumption and acceleration in infrastructure creation. Prime Minister Mahmohan Singh has promised a complete policy on infrastructure, including regulatory and institutional framework, to make it attractive for private participation in the near future.

Continued inflows from FIIs are notwithstanding apprehensions regarding stretched valuations of Indian equities.

A weaker-than-expected reading in a gauge of US consumer sentiment weighed on Asian stocks on Friday. Key benchmark indices in Hong Kong, Japan, and South Korea were down by 0.17% to 0.3%. Key benchmark indices in Taiwan and Singapore were up by between up by between 0.02% to 0.09%.

US stocks fell for the first time in three days on Thursday, led by a drop in the shares of big drug makers and health-care companies as investors worried that a Democrat-controlled Congress may move to curb prices. A jump of more than 2 percent in crude oil prices and a weaker-than-expected reading in a gauge of consumer sentiment added to the weaker tone. The Dow Jones industrial average was down 73.24 points, or 0.60 percent, to close at 12,103.30. The Standard & Poor's 500 Index was down 7.39 points, or 0.53 percent, to finish at 1,378.33. The Nasdaq Composite Index was down 8.93 points, or 0.37 percent, to end at 2,376.01.

Oil was steady above $61 a barrel after surging more than 2 percent on Thursday. Producer cartel OPEC is lowering output and some members have said it may cut supply further in December -- as demand is nearing its seasonal peak in the Northern winter.