F&O expiry…weak opening, choppy ending!

Everything is connected... no one thing can change by itself. - Paul Hawken.

Domestic politics and world markets seem to be connected in playing spoilsport. There is nothing much to change the mood for the last two trading sessions of 2011. F&O expiry will only add to the volatility. The weekly food inflation numbers will be tracked closely after having come off sharply in the past few weeks. Contrary to the usual norm at the end of a year, FIIs have been modest buyers of Indian equities lately. However, the overseas capital flows are not strong enough to make any impression on the market's direction. Volumes may pick up due to the derivative settlement.



The start is likely to be down. The indices in the US and Europe closed lower as ECB’s data on lending to regional banks offset an encouraging T-bills auction in debt-laden Italy. The euro fell to a 15-month low versus the dollar after the ECB said its balance sheet expanded to record. The dollar has strengthened. Asian markets are mostly in the red this morning as well. Oil declined for the first time in seven sessions. Gold and silver too slipped. Watch out for the rupee after its sharp rebound on Wednesday.

The selling pressure on Wednesday aggravated after the Nifty breached 4750 and closed near 4700. Multiple supports are seen in the range of 4630-4650 from where a bounce is likely. In the near term, the possibility of the Nifty breaking below the previous trough of 4530 remains low as the RSI is trading with positive divergence and is placed in an extreme oversold terrain.

FIIs were net buyers of Rs 814.4mn (provisional) in the cash segment on Wednesday, according to NSE data. The domestic institutional investors (DIIs) were net sellers of Rs 964.9mn on the same day.

The foreign funds were net buyers of Rs 5.58bn (provisional) in the F&O segment, NSE data shows.

FIIs were net buyers at ~Rs 3.63bn in the cash segment on Tuesday, according to SEBI web site. Mutual Funds were net buyers of Rs 67mn on the same day.