Market to consolidate; volatility may remain high

The market is expected to consolidate further after a sharp fall yesterday, 18 October 2007. The BSE Sensex retraced sharply after striking all-time high of 19,198.66 in afternoon trade. It plunged as much as 944.66 points to touch a low of 17,771.16 in late trade, swinging 1,427.50 points in the day. It settled 717.43 points or 3.83% lower at 17,998.39. The broader based S&P CNX Nifty lost 208.3 points, or 3.75%, to 5,351. It had hit all-time high of 5,736.80 in early afternoon trade.

Volatility is expected to remain high for in coming few days ahead of expiry of October 2007 derivatives contracts on Thursday, 25 October 2007.

Meanwhile, the finance minister P Chidambaram said after market hours yesterday, 18 October 2007 that Securities and Exchange Board of India (Sebi) can extend the 18-month window allowed for winding down of participatory notes already issued with derivatives as the underlying. Sebi will decide on 25 October 2007 on new rules to limit the use of offshore derivatives to invest in Indian stocks.

Annual inflation data, based on the wholesale price index (WPI), for the week ended 6 October 2007 is due today, 19 October 2007. Inflation rose 3.26% in the week ending 29 September 2007 from 3.42% in the week ending 22 September 2007.

Asian markets were trading mixed today, 19 October 2007. Japan's Nikkei (down 1.59% at 16,834.11), Singapore's Straits Times (down 1.14% at 3,766.13), South Korea's Seoul Composite (down 0.69% at 1,991.22) edged lower. However, Hong Kong's Hang Seng (up 0.57% at 29,465.05) and Taiwan's Taiwan Weighted (up 0.10% or 9,646.86) gained.

US markets ended mixed yesterday, 18 October 2007, after disappointing results from Bank of America Corp. provided further evidence that the credit crisis is hurting the economy. The Dow Jones Industrial Average slipped 3.58 points, or 0.03%, to 13,888.96. The Standard & Poor's index fell 1.16 points, or 0.08%, to 1,540.08. The technology-heavy Nasdaq Composite Index rose 6.64 points, or 0.24%, to 2,799.31.

Crude oil held firm within sight of its new $90 high on Friday, 19 October 2007, on rising fears over pre-winter fuel stocks lent support to an over 13% surge in under two weeks. US light crude for the soon-to-expire November contract rose 5 cents to $89.52 a barrel. The contract touched a record high of $90.02 in after-hours trade.

As per provisional data, foreign institutional investors (FIIs) sold shares worth a net Rs 1130.59 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 96.02 crore on Thursday, 18 October 2007.