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Market to sag next week; volatility likely ahead of F&O expiry

This article was posted on Feb 21, 2009 and is filed under Market Outlook

MUMBAI: Week after week, investors have been desperately looking for some positive trigger that could help lift market sentiment. However, with the Interim Budget turning out to be a non-event and the global market scenario turning from bad to worse, the outlook for the Indian stock market appears grim.

As traders step into a truncated week of trade, the market mood remains somber. “The market will see continuation of this week’s weakness. There is sheer uncertainty on the direction of the market. Also, the global pressure is not easing, which has seen constant outflows from the FIIs. The only glimmer of hope is a rate cut by the Reserve Bank. But the market has been anticipating a move from the central bank for the past few weeks, so that news has also been discounted,” said Hitesh Agarwal, head of research at Angel Broking.

Investors in Asia and Europe found few reasons to wade into the market on Friday after the Dow Jones breached the levels it touched in November when global equities went into a tailspin at the height of last year’s financial crisis.

The Dow’s miserable finish below 7500 deepened concerns that the markets’ downturn is far from over. It also provided a clear sign that investors don’t see a quick end to the worst global slowdown in decades despite the unprecedented intervention in economies and markets by governments around the world.

On Friday, Bombay Stock Exchange’s 30-share Sensex ended at 8,843.21, down 199 per cent or 2.21 points. On a week-on-week basis, the index has witnessed a fall of 8.22 per cent. National Stock Exchange’s Nifty lost 1.9 per cent or 52.9 points to 2736.45. The 50-share index has slipped 7.18 per cent compared to week ended Feb 13.

Furthermore, with the derivatives contracts expiry for February in the forthcoming week, volatility is also likely. “The overall market situation is very grim. The increasing open interest coupled with declining shares is a cause for concern. I expect the Nifty to break below 2600 before expiry. Also, with the change in lot sizes post Feb expiry, margin traders would be thrown out of the market and this could have dampen market participation further,” said Manish Innani of Prayas Securities, who is also a member of NSE.

According to the NSE circular, stocks with derivative contract size or value of less than Rs 2,00,000 will see their lot size increasing two-three folds. As a result, 243 stocks would see rise in lot sizes with effect from March expiry.

The Indian stock market will remain closed on Monday on account of Maha Shivratri.

source: Economictimes

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