Volatility may remain high

The market is likely to recover after Tuesday’s 172 points correction that was triggered by weak global markets. Recovery in Asian markets will aid recovery on domestic bourses. But volatility may remain high ahead of expiry of November 2006 derivatives contracts on Thursday 30 November. Market men are also eyeing the extent of rollover to December 2006 contracts from November contracts ahead of expiry of November contracts.

As per provisional data, FIIs were net sellers to the tune of Rs 439 crore on Tuesday 28 November, the day when Sensex had lost 172 points. They pressed heavy sales in index-based futures to the tune of Rs 1748 crore on that day. They were net sellers to the tune of Rs 839 crore in individual stock futures on that day.

Meanwhile, large daily FII figures over the past few days indicate that there have been simultaneous entries and exits. This in turn indicates of different strategies being adopted by various FIIs operating in India. This also suggests churning of portfolios. On a net basis, there has been stepping up of inflow by FIIs over the past two months. The hefty FII figures this month is partly due to their subscription to IPOs of Parsvnath Developers, Lanco Infratech and Info Edge India. The cumulative FII inflow for November 2006 has reached Rs 9778.40 crore.

Japanese shares led recovery in Asian stocks on Wednesday following robust industrial output data in Japan. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 0.08% to 1.1%.

US stocks rose modestly on Tuesday as energy shares advanced on higher oil prices and overshadowed a warning on the risks of inflation from Federal Reserve Chairman Ben Bernanke that reduced hopes of an interest-rate cut any time soon. The Dow Jones industrial average gained 14.74 points, or 0.12 percent, to end at 12,136.45. The Standard & Poor's 500 Index added 4.82 points, or 0.35 percent, to finish at 1,386.72. The Nasdaq Composite Index rose 6.69 points, or 0.28 percent, to close at 2,412.61.

NYMEX crude for January delivery rose 13 cents to $61.12 a barrel, building on this week's gains after private forecaster AccuWeather said that cold weather would sweep into the US Northeast by the weekend, ending a recent warm spell in the world's biggest heating oil market.