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Friday, December 22, 2006

INVESTMENT STRATEGY


Another volatile week in the offing

Last Christmas, I gave you my heart
But the very next day, You gave it away
This year, to save me from tears
I'll give it to someone special
Once bitten and twice shy
I keep my distance but you still catch my eye

Its Christmas time! We have had enough of Bulls and Bears, the ongoing tussle between them have made markets more volatile. The Christmas will provide some time for the bulls to nurse their wounds. The sharp swings on the eve of the Christmas may have tempted investors to sing the famous Christmas song by WHAM! But, the bulls would certainly be hoping that the sunny days will be here again sooner rather than later.

Next week will be crucial as December F&O series comes to an end. Some short positions have been created for the January series while longs for the current-month contracts have been cut. It remains to be seen as to what happens to these positions. Which way the cookie crumbles is anybody's guess. The market will remain volatile as the near term direction remains unclear. The Oct-Dec quarter results and the Budget could provide some much-needed tonic to the bulls, who seem to be suffering from some fatigue after the rally since late July. There could be some more churning and consolidation in the near term, as there are no immediate positive triggers. One should adopt a cautious approach at this point in time and wait for a clear trend. FII inflows have slowed down this month partially due to the Christmas holidays. They may resume their buying spree some time early next year when the latest batch of results start trickling in. A reform-centric budget could provide further boost to the market. Having said that, in the short term the uncertainty is likely to continue, which will keep the bulls on tenterhooks. So, some caution is required. Any negative surprise there could spook the rally. Positions may get lighter and the F&O expiry next week would keep the market choppy.