Derivatives expiry to keep market volatile

The market is expected to remain volatile in coming week as December 2007 derivatives contracts expire on Thursday, 27 December 2007. Trading for the week ahead will be truncated, as market will remain closed on Tuesday, 25 December 2007 on account of Christmas. Volumes may be low as foreign fund managers will be on annual vacation.

The 30-share BSE Sensex declined 868.26 points or 4.33% to 19,162.57 in the week ended Thursday, 20 December 2007. The S&P CNX Nifty slipped 281.20 points or 4.64% to 5,766.50 in the week. The market had posted gains during the preceding three weeks in a row.

Foreign Institutional Investors (FIIs) may resort to year-end profit taking. They follow calendar year as their accounting year. FIIs had been the key drivers of the recent rally. Their inflow in calendar year 2007 totaled Rs 67,329.50 crore (till 19 December 2007). They were net buyers to the tune of Rs 1,422 (till 19 December 2007).

Domestic market will also be influenced by the global trend. Investors remain nervous on concerns that credit market crisis may intensify further. Any major sell-off in global markets may cast its shadow here as well.

Meanwhile, traders are likely to start building positions towards the end of the month based on expectations of Q3 December 2007 results due next month.