Market may turn volatile after firm opening

The market is likely to open higher taking cue from steady to firm Asian markets. But according to a dealer with a domestic brokerage, the market may lose steam after a firm opening. He expects correction to continue on the bourses. A dealer with another brokerage expects mid-cap stocks to extend gains. A host of battered small-cap and mid-cap stocks had surged on Wednesday (13 December).

Though Sensex is sharply off its record high of above 14,000, equity valuations still remain steep. Sensex’s current PE multiple is 21.72 based on trailing 12-month September 2006 earnings. Indian market is most expensive compared to its regional and emerging market peers.

Sensex staged a recovery on Wednesday (13 December) gaining 186 points. A lower-than-expected industrial output growth for October 2006 caused a 404-point fall in the Sensex on Tuesday (12 December), after the barometer index lost 400 points on Monday (11 December) following a surprise hike in the cash reserve ratio (CRR) by the RBI, which raised fears of a rise in interest rates. Interest rates in the economy have already started firming up. On Wednesday, ICICI Bank raised lending rates by 50 basis points across the board.

After the latest economic data, market men will now be closely eyeing advance tax payment by corporates for the third installment, which is due on 15 December 2006. The corporate advance tax payment will provide a broad outline of Q3 corporate results. More so, given that strong earnings growth has been a key driver of the bull-run on the bourses.

Market men will also be watching FII allocations for India for calendar year 2007.

As per provisional figures, FIIs were net buyers to the tune of Rs 24.52 crore on 13 December, the day when the Sensex had risen 186 points. Their inflow was Rs 95 crore on 12 December, the day when Sensex had plunged 404 points.

Last few days witnessed substantial FII sales in index-based futures. FIIs were net sellers to the tune of Rs 284 crore in index-based futures on 13 December. Their net sales in index-based futures in four trading sessions between 8 December to 13 December totaled Rs 3036 crore. Last two days also witnessed substantial FII purchases in individual stock futures, worth Rs 780 crore (between 12 December to 13 December).

Asian markets were in the green on Thursday. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 0.4% to 0.7%.

US stocks closed little changed on Wednesday as surprisingly strong retail sales data raised hopes for the holiday season, offsetting a rise in oil prices that hurt industrial shares. The Dow Jones industrial average advanced 1.92 points, or 0.02 percent, to end at 12,317.50. The Standard & Poor's 500 Index rose 1.65 points, or 0.12 percent, to finish at 1,413.21. The Nasdaq Composite Index eked out a gain of just 0.81 of a point, or 0.03 percent, to close at 2,432.41.

US crude oil futures for January delivery rose 35 cents to settle at $61.37 a barrel on the New York Mercantile Exchange on Wednesday, after government data showed crude inventories fell more than expected in the latest week. NYMEX January crude futures hit a session high at $61.85.

Further correction expected

A further correction is likely with data showing heavy FII sales in the derivatives markets for the second day in a row on Monday (11 December). FIIs were net sellers to the tune of Rs 1250 crore in index based futures on 11 December, the day when Sensex had plunged 400 points. Data showing FII sales of Rs Rs 1,087 crore in index based futures on 8 December and fears of rise in interest rates following RBI’s surprise 50 basis point hike in cash reserve ratio had rattled the bourses on 11 December.

As per provisional data, FIIs were net buyers to the tune of Rs 334 crore in the cash segment on 11 December, the day when Sensex had lost 400 points. They were net sellers to the tune of Rs 152.60 crore on 8 December, the day when Sensex had lost 173 points.

But steady to firm trend in Key Asian markets would cap further downside on the domestic bourses. Japan’s Nikkei was up nearly 1% and Hong Kong’s Hang Seng was up 0.14%. In the near term, US Federal Reserve’s decision on US interest rates remains a principal trigger for domestic bourses. US Fed meeting is due later today and expectations of interest rates staying unchanged run high. Analysts will closely watch the Fed’s accompanying statement for cues of future rate moves. Investors are waiting to see if the Fed will tone down its hawkish stance in its statement accompanying the decision.

US stocks edged higher on Monday. The Dow Jones industrial average rose 20.99 points, or 0.17 percent, to close at 12,328.48. The Standard & Poor's 500 Index ended up 3.20 points, or 0.23 percent, to finish at 1,413.04. The Nasdaq Composite Index gained 5.50 points, or 0.23 percent, to end at 2,442.86.

US crude oil for January delivery fell 81 cents, or 1.3 percent, to settle at $61.22 a barrel, while London Brent crude fell 36 cents to $61.84 a barrel.

A major near term trigger for the domestic bourses is Q3 December 2006 results. It is expected to be another quarter of strong performance from corporate India.

Meanwhile, good FII allocations are expected for India in the new calendar year 2007.

The response to the IPO of Cairn India was strong on day one of opening of the IPO on 11 December notwithstanding the sharp fall on the bourses on that day. The IPO received bids for 43.01 crore shares compared to issue size of 32.87 crore. Most of the bidding on the first day was from FIIs. They bid for 42.85 crore shares against 19.72 crore shares reserved for this category in the IPO.

Market may hold firm on sustained FII inflow

The market may remain steady to firm on the back of sustained FII buying. But the upside may be capped by subdued to weak trend in Asian markets.

IT stocks may hog limelight after Oracle raised open offer hike for i-flex sharply to Rs 2100 per share from Rs 1475 per share.

The market sentiment remains firm due to strong FII inflow, continued strong economic growth data and healthy corporate earnings. A lot of money is said to be waiting on the sidelines to enter the market at correction. Very few got an opportunity to ride the latest rally, it being a sharp and swift rally with the Sensex having risen 10% in a little over a month.

FIIs bought shares worth a net Rs 244 crore on 6 December, the day when Sensex had risen 11 points. Cumulative FII inflow in 2006 has reached $8.4 billion compared to a record inflow of $10.7 billion in 2005.

But mutual funds turned sellers on 6 December. They sold shares worth a net Rs 177 crore on that day compared to their inflow of Rs 398 crore in three trading sessions between 1 December to 5 December.

Asian stocks fell on Friday, with Seoul shares slipping to a near four-week low, while the US dollar was little changed as investors waited for data from Japan and the United States for clues on interest rates. Key benchmark indices in Hong Kong, Japan, South Korea, and Taiwan were down by between 0.06% to 1.4%.

US stocks fell on Thursday as investors locked in profits ahead of jobs data on Friday that could show further weakening in the economy and hurt corporate earnings. The Dow Jones industrial average dropped 30.84 points, or 0.25 percent, to end at 12,278.41. The Standard & Poor's 500 Index declined 5.61 points, or 0.40 percent, to finish at 1,407.29. The Nasdaq Composite Index slid 18.17 points, or 0.74 percent, to close at 2,427.69.

Oil rose slightly to $62.79 a barrel, trading in a narrow range ahead of OPEC's meeting next week to decide whether to cut output further.

Firmness may persist

Market may remain steady to firm today following overnight gain in US stocks. But profit taking may cap upside with Sensex having risen sharply over the past one month. From 12,623.28 on 23 October, the barometer index has risen 10.4%.

The market sentiment remains firm due to strong FII inflow, continued strong economic growth data and healthy corporate earnings. In the near term, the downside on the bourses will be capped by Q3 results expectations. Market men expect Q3 December 2006 to be another strong quarter in terms of earnings growth. After Q3 results season, budget expectations may keep market firm till end of February 2007.

As per provisional data, FIIs were net buyers to the tune of Rs 302 crore on Tuesday 5 December, the day when Sensex had risen 63 points. The cumulative FII inflow has reached $8.3 billion in 2006 compared to a record inflow of $10.7 billion in 2005.

Asian markets were mixed on Wednesday. Key benchmark indices in Hong Kong, Japan and Taiwan were up by between 0.2% to 0.8%. Key benchmark indices in Singapore and South Korea were down by between 0.3% to 0.9%.

US stocks rose on Tuesday as a report showing unexpected strength in the key services sector suggested earnings growth would weather the housing slowdown. The Dow Jones industrial average rose 47.75 points, or 0.39 percent, to end at 12,331.60. The Standard & Poor's 500 Index was up 5.64 points, or 0.40 percent, at 1,414.76. The Nasdaq Composite Index was up 3.99 points, or 0.16 percent, to close at 2,452.38.

Oil prices stalled around $62.50 on Wednesday as caution set in ahead of the release of US inventory data, which is seen as likely to show a fall in heating fuel stocks. US crude was trading 18 cents higher at $62.61 a barrel.

Sensex may test 14,000

Sensex surged 148 points to 13,844.78 on Friday (1 December) following a good rollover in the derivatives segment from November series to December series and on decent to strong auto sales figures for the month just gone by. The barometer index is now just about 150 points short of the next psychologically important level of 14,000. Nifty hit the psychologically important 4,000 mark on 1 December. It ended slightly below that on that day.

Sensex may test 14,000 level this week. But subdued trend in Asian bourses and a surge in crude price to above $63 a barrel may cap upmove on the domestic bourses today.

The market sentiment remains bullish due to strong FII-inflow, continued strong economic data and an upward revision in earnings growth of corporates by brokerages, on the back of strong Q2 results.

The latest data showed FIIs resumed buying after two-day outflow. FIIs bought shares worth a net Rs 258.10 crore on Thursday 30 November, compared to an outflow of Rs 63 crore on Wednesday 29 November. FIIs had pulled out a net Rs 335.30 crore on 28 November. Cumulative FII inflow for 2006 has reached $8.8 billion compared to record inflow of $10.7 billion in 2005.

Asian markets were mostly subdued on Monday (4 December). Key benchmark indices in Hong Kong, Japan, South Korea, and Singapore were down by between 0.1% to 0.3%.

US stocks fell on Friday after a manufacturing index showed its weakest reading in more than three years and a Federal Reserve official said more rate hikes may be required to control inflation. The Dow Jones industrial average fell 27.80 points, or 0.23 percent, to 12,194.13, while the Standard & Poor's 500 Index dropped 3.92 points, or 0.28 percent, to 1,396.71. The Nasdaq Composite Index sank 18.56 points, or 0.76 percent, to 2,413.21.

Nymex crude was hovering at $63.47 after Friday (1 December)’s surge.

Firmness may prevail

Strong Q2 GDP growth data, firm global markets and short covering in derivatives segment due to expiry of November derivatives contracts pushed Sensex up 80 points on Thursday (30 November). The market sentiment remains bullish due to strong FII-inflow and an upward revision in earnings growth of corporates by brokerages, on the back of strong Q2 results. The market would today eye monthly auto sales.

As per provisional data, FIIs were net buyers to the tune of Rs 88 crore on Thursday. Though FIIs were net sellers for the second day in a row on Wednesday (29 November), their outflow on that day of Rs 63 crore was much lower than Tuesday (28 November)’s Rs 335.30 crore.

Cumulative inflow of FIIs for November 2006 totaled Rs 9380.10 crore (till 29 November). FII inflow in November included their subscription to IPOs of Parsvnath Developers, Lanco Infratech and Info Edge India. There are expectations that FIIs may step up buying this month as allocations will be made for New Year calendar 2007.

But profit taking may cap further upside from the current level with the Sensex having risen sharply in the past few weeks. From 12,623.28 on 23 October, the BSE Sensex is up 8.5% in a little over a month.

Asian stock markets were mixed on Friday, with Japanese stocks rising and South Korean shares touching a six-month high, while Australia and Hong Kong dropped back from recent life highs.

US stocks ended little changed on Thursday as a report showing slowing Midwestern business activity offset gains in energy stocks on the back of rising oil prices. The Dow Jones industrial average fell 4.80 points, or 0.04 percent, to end at 12,221.93. The Standard & Poor's 500 Index rose 1.15 points, or 0.08 percent, to finish at 1,400.63. The Nasdaq Composite Index inched down just 0.46 of a point, or 0.02 percent, to close at 2,431.77.

Oil slipped more than half a percent, as profit-taking took the steam out of a four-session rally driven by a fall in US winter fuel stocks that had pushed prices to a two-month high above $63 a barrel. NYMEX crude for January delivery fell 34 cents to $62.79 a barrel, partially reversing a 67 cent rally on Thursday, when prices pushed up to their highest since Sept. 28.

Volatility may remain high due to derivatives expiry

The market is likely to open on a firm note taking cue from firm global markets. However, volatility may remain high as investors square off or roll over November 2006 derivatives contracts to December 2006 series. The November derivatives contracts expire today.

Mutual funds may remain active in the market today to support their month-end net asset values (NAVs).

FIIs were net sellers to the tune of Rs 335 crore on Tuesday (28 November). This was their biggest daily inflow this month. As per provisional data, FIIs were net sellers to the tune of Rs 241 crore on 29 November. They were net buyers to the tune of Rs 291 crore in index-based futures on 29 November. They were net sellers to the tune of Rs 730 crore in individual stock futures on that day. Weakness in index heavyweights restricted Sensex’s gain on Wednesday (29 November) to 15 points.

Asian shares rose on Thursday, led by exporters and resource stocks, after upbeat US growth data eased concerns about the health of the economy in Asia's biggest export market. Japanese shares rose to their highest in nearly two weeks, South Korean stocks hit a six-month high and Singapore's benchmark index notched up a record peak.

US stocks jumped on Wednesday after the government raised its estimate for economic growth and a surge in oil prices lifted energy stocks, helping major indexes recover most of the ground they lost from a big sell-off early in the week. The Dow Jones industrial average rose 90.28 points, or 0.74 percent, to finish at 12,226.73, while the Standard & Poor's 500 Index jumped 12.76 points, or 0.92 percent, to close at 1,399.48. The Nasdaq Composite Index advanced 19.62 points, or 0.81 percent, to end at 2,432.23.

US oil futures dipped, but still remained near a two-month high after weekly U.S. inventory data showed a surprise decline in heating fuel stocks in the world's biggest consumer. NYMEX crude for January delivery fell 17 cents to $62.29 a barrel.

Volatility may remain high

The market is likely to recover after Tuesday’s 172 points correction that was triggered by weak global markets. Recovery in Asian markets will aid recovery on domestic bourses. But volatility may remain high ahead of expiry of November 2006 derivatives contracts on Thursday 30 November. Market men are also eyeing the extent of rollover to December 2006 contracts from November contracts ahead of expiry of November contracts.

As per provisional data, FIIs were net sellers to the tune of Rs 439 crore on Tuesday 28 November, the day when Sensex had lost 172 points. They pressed heavy sales in index-based futures to the tune of Rs 1748 crore on that day. They were net sellers to the tune of Rs 839 crore in individual stock futures on that day.

Meanwhile, large daily FII figures over the past few days indicate that there have been simultaneous entries and exits. This in turn indicates of different strategies being adopted by various FIIs operating in India. This also suggests churning of portfolios. On a net basis, there has been stepping up of inflow by FIIs over the past two months. The hefty FII figures this month is partly due to their subscription to IPOs of Parsvnath Developers, Lanco Infratech and Info Edge India. The cumulative FII inflow for November 2006 has reached Rs 9778.40 crore.

Japanese shares led recovery in Asian stocks on Wednesday following robust industrial output data in Japan. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 0.08% to 1.1%.

US stocks rose modestly on Tuesday as energy shares advanced on higher oil prices and overshadowed a warning on the risks of inflation from Federal Reserve Chairman Ben Bernanke that reduced hopes of an interest-rate cut any time soon. The Dow Jones industrial average gained 14.74 points, or 0.12 percent, to end at 12,136.45. The Standard & Poor's 500 Index added 4.82 points, or 0.35 percent, to finish at 1,386.72. The Nasdaq Composite Index rose 6.69 points, or 0.28 percent, to close at 2,412.61.

NYMEX crude for January delivery rose 13 cents to $61.12 a barrel, building on this week's gains after private forecaster AccuWeather said that cold weather would sweep into the US Northeast by the weekend, ending a recent warm spell in the world's biggest heating oil market.

Volatility may heighten ahead of derivatives expiry

Market men will eye the extent of rollover to December 2006 contracts from November contracts ahead of expiry of November contracts this Thursday (30 November). Derivatives positions are quite large. On 22 November, the open interest in NSE’s futures & options segment hit an all-time high of Rs 57,158 crore. The previous record high was Rs 56,991 crore of 27 April 2006. 46% of the open positions are stock futures and 22% are index-based futures.

Meanwhile, large daily FII figures indicate that there have been simultaneous entries and exits. This in turn indicates of different strategies being adopted by various FIIs operating in India. This also suggests churning of portfolios.

On a net basis, there has been stepping up of inflow by FIIs over the past two months. Their inflow totaled Rs 8378.20 crore in November 2006 (till 23 November). The inflow was Rs 8013 crore in October 2006. The inflow was Rs 1145 crore in July, Rs 4643.10 crore in August and Rs 5425 crore in September. The cumulative inflow for calendar 2006 has totaled $8.5 billion. The inflow was a record $10.7 billion 2005.

In the near term, the market would take cue from as to what extent the ruling government is able to pass some of the financial sector reforms. The winter session will debate, among other things, the Banking Regulation (Amendment) Bill, which proposes to increase the voting rights of foreign stakeholders in private banks presently capped at 10%. However, the Left parties are opposed to the amendment fearing that it will lead to a takeover of private banks by foreign entities. The winter session has just begun, and will last till 19 December 2006.

Asian markets were mixed on Monday. Key benchmark indices in Japan, Singapore and Taiwan were up by between 0.4% to 0.8%. Key benchmark indices in Hong Kong and South Korea were down by between 0.2% to 0.5%.

Oil eased back on Monday from gains made late last week. NYMEX crude for January delivery was at $59.55 a barrel, down from $59.90 at the end of an electronic-only trading session on Friday, and London Brent crude fell 29 cents to $59.74.

Firmness to prevail

Tame US inflation data, fall in oil price to one-year low and news that US Senate had approved the Indo-US nuclear deal would trigger firm opening on the bourses. However, the upside on the bourses may be capped by profit taking with the Sensex hitting a string of record highs over the past few days.

In the near term, the market would take cue from as to what extent the ruling government is able to pass some of the financial sector reforms. The winter session will debate, among other things, the Banking Regulation (Amendment) Bill. The Bill proposes to increase the voting rights of foreign stakeholders in private banks, which is capped at 10% now. However, the Left parties are opposed to amendment to the Banking Regulation Act, fearing that increase in voting rights in private sector banks will lead to a takeover of these banks by foreign entities.

US crude fell 13 cents to $56.13 a barrel after plumbing a low of $55.99, following a $2.50 drop on Thursday as swelling US crude stockpiles and forecasts of a mild winter in the world's top consumer weighed on the market.

US Senate on Thursday approved the Indo-US nuclear deal. The deal now needs to be voted jointly by the two houses of the US Congress after they reconcile the separate legislations they have approved, followed by approvals from the International Atomic Energy Agency and the 45-nation Nuclear Suppliers Group. The nuclear deal has become symbolic of the new friendship between the two countries. The deal is critical for India to help it allow buy US nuclear fuel and equipment to boost its nuclear programme and meet its soaring energy needs.

US stocks rose for a fifth straight day on Thursday as investors bet that a slide in crude oil prices and tamer consumer price data would prompt the Federal Reserve to cut interest rates starting sometime next year. The blue-chip Dow average achieved its longest winning streak since August, rising 54.11 points, or 0.44 percent, to end at a record 12,305.82. The Standard & Poor's 500 Index gained 3.19 points, or 0.23 percent, to finish at 1,399.76, and during the session it jumped to a six-year intraday peak of 1,403.76.

Most Asian markets were in the green on Friday. Key benchmark indices in Hong Kong, South Korea, Singapore and Taiwan were up by between 0.14% to 0.3%. Japan’s Nikkei was down 0.2%.

As per provisional data, FIIs were net sellers for the second day in a row on Thursday. FIIs were net sellers to the tune of Rs 33.56 crore on Thursday. Their provisional outflow was Rs 84 crore on Wednesday.