The Hindu Business Line : Range-bound movement seen with high intra-day volatility

This week, volatility may be even higher. The contracts expiry in the futures and options segment in the backdrop of exit of 50 stocks from derivatives trading may accentuate swings.

According to market players, there is still a significant overhang of shorts. Some of arbitrage strategies may have also gone sour. These may add to usual fluctuation in a contract-end week.

But, it is generally expected that buyers would emerge if the market tends to dip significantly. On the other hand, there are likely to be sellers if the market tries to suddenly to shoot up.

This indicates that market may move within a tight band this week. So, if one wants to hazard a guess it could perhaps be a 600 or 700-point range on the Sensex. This also presupposes that frequency of oscillation between top and bottom of the band would increase.

Having factored in the major economic and political probabilities, Dalal Streets seems to reconcile to a temporary lull.

Significant directional calls are expected to trickle in from June when election and number season would come to a close.

Better show so far

Market is resilient because corporate results have been better than expected. Results of the 10 Sensex companies, which have come out with 2008-09 fourth quarter numbers or provisional results so far, have shown lesser earnings de-growth than apprehended by the market participants.

In the mid- and small-cap universe, profit and loss accounts more or less paint the same picture as was envisioned and built already into the prices.

Some of the heavyweights, mostly at analysts’ conference, have raised hopes of improvement going forward.

According to market intelligence, the last weeks trading pattern in the local market suggested that amid the overall fall in activity blue chips hogged the limelight.

Local investors, including day traders, have shown marked fall their participation.

FIIs in analysing mode

Overseas investors remained glued to the top 50 stocks. But, their attention towards mid-cap stocks appears to be growing.

Market intermediaries, who regularly interact with FIIs, say that it would not be surprising if they actually start buying select mid-cap stocks shortly.

The balance sheets and management’s outlook would be crucial for mid-cap stock at a time when negative performance is apprehended in the next few quarters.

One gets the impression that long-term investors would like to wait a while before committing fresh money into mid cap stocks.

Some of them have been seeing a forward momentum. However, only price actions may not lure investors, particularly the retail ones. This community may wait until clarity emerges.

The short-term traders also seem to be a confused lot. Higher volatility scared them.

(Responses may be sent to jayanta_mallick@thehindu.co.in)