Recovery on cards due to firm Asian markets

The market may edge higher today tracking firm Asian and US stocks. However, the upside may be capped by data showing FII outflow after a recent surge in their inflow. Strong Japanese economic growth data has also lifted expectations for a rate increase at the Bank of Japan’s policy meeting on 21 February 2007.

The market witnessed a sharp correction amid immensely volatile trade over the past four days due to worries of rising interest rates and due to a large number of IPOs lined up in the coming weeks.

Nifty has found support at its crucial level of 4000-4040. It is currently at 4047.10. Nifty also has strong resistance at 4,135 and will turn bullish for a short-term only if it breaks 4,135. In that case, Nifty can again test its all-time high of 4,245, according to technical analysts.

FIIs were net sellers to the tune of Rs 240 crore on Tuesday 13 February 2007, the day when Sensex had lost 100 points. As per provisional data they were net sellers to the tune of Rs 165 crore on Wednesday 14 February, the day when Sensex had lost 81 points.

FIIs were net sellers to the tune of Rs 247 crore in index-based futures on 14 February. In the recent market correction, there were heavy FII sales in index-based futures. FIIs net sellers to the tune of Rs 451 crore in individual stock futures on 14 February. Volatility may continue in the near term ahead of expiry of February 2006 contracts next Thursday 22 February 2007. The market remains closed tomorrow on account of Mahashivratri.

Asian shares were firm on Thursday. Key benchmark indices in Hong Kong, Japan, South Korea and Singapore were up by between 0.7% to 1.8%.

US stocks and bonds surged on Wednesday, with the Dow climbing to an intraday record, after Federal Reserve Chairman Ben Bernanke said the economy is growing and inflation pressures were starting to ease. The Dow Jones industrial average rose 87.01 points, or 0.69 percent, to end at 12,741.86. The Standard & Poor's 500 Index gained 11.04 points, or 0.76 percent, to finish at 1,455.30. The Nasdaq Composite Index advanced 28.50 points, or 1.16 percent, to close at 2,488.38, off its session high at 2,494.51.