Market may remain volatile

The market continues to see volatility ahead of the expiry of December 2006 derivatives contracts. According to dealers, an early rollover/squaring up is happening in derivatives contracts this time as foreign fund managers will be on Christmas and New Year holiday. December 2006 derivatives contracts expire next Thursday (28 December).

FIIs pressed substantial sales for the second day in a row on Wednesday (20 December). Their net outflow was Rs 365.10 crore on 20 December compared to an outflow of Rs 673.40 crore on 19 December. The outflow in two trading sessions between 19 December and 20 December aggregated Rs 1038.50 crore.

But the provisional data pertaining on Thursday (21 December)’s trade showed that FIIs were net buyers to the tune of Rs 254 crore on that day. They were net sellers to the tune of Rs 301 crore in index-based futures. They were net buyers to the tune of Rs 52 crore in individual stock futures.

Mutual funds stepped up buying on 20 December. They bought shares worth a net Rs 460 crore on that day.

As foreign fund managers will be on a holiday for Christmas and the New Year, operators and mutual funds will dictate the activity on the bourses till the year-end, according to dealers.

The near term trigger for domestic bourses is Q3 December 2006 results. Market men expect December 2006 quarter to be another strong quarter in terms of earnings growth. Strong advance tax payments corroborate the view that Q3 results would be strong. Cement companies and oil firms have paid substantially higher advance tax in the third installment of 15 December 2006. State Bank of India, Tata Steel, Reliance Industries (RIL), Hindalco, L&T, and Cipla have paid substantially higher advance tax in the third installment. The Q3 results would start trickling in from about 12 January 2007.

Technical analysts feel that the Nifty has a strong support at 3,700 and Sensex at 12,800-12,900.

Finance Minister P Chidambaram on Thursday said the country's economy would grow at nearly 9 percent this year and that it can grow at that rate or higher for several years in future.

Asian markets were mostly in the green on Thursday. Key benchmark indices in Hong Kong, Singapore, South Korea and Taiwan were up by between 0.07% to 0.5%.

US stocks dropped on Thursday as concerns that economic growth could be slowing faster than expected dented optimism about corporate profits. Reports that showed a contraction in regional business activity and a downward revision in GDP data overshadowed a fresh flurry of corporate takeovers. The Dow Jones industrial average was down 42.62 points, or 0.34 percent, to end at 12,421.25. The Standard & Poor's 500 Index was down 5.22 points, or 0.37 percent, to finish at 1,418.31. The Nasdaq Composite Index was down 11.76 points, or 0.48 percent, to close at 2,415.85.

US crude was steady at $62.66 a barrel in early Asian trade. It had declined sharply on unusually mild temperatures in the United States.