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Friday, December 29, 2006

Cautiousness may prevail due to sustained FII sales


The market may edge lower with data showing sustained FII sales. As per provisional data, FIIs were net sellers to the tune of Rs 1022.55 crore on Thursday 28 December, the day when Sensex had lost 13 points. FIIs were net sellers to the tune of Rs 368 crore on Wednesday 27 December, the day when Sensex had surged 151 points.

There have been persistent FII sales in equities since the middle of this month. In December 2006 so far (till 27 December) FIIs have offloaded shares worth Rs 2617.70 crore. This includes a huge outflow of Rs 2,814 crore in a single trading session on 4 December because FIIs reported money that they had received from shares they tendered in the sponsored ADR issue of Infosys.

FIIs were net sellers to the tune of Rs 231 crore in index-based futures on 28 December. They were net buyers to the tune of Rs 321 crore in individual stock futures on that day.

Mutual funds, meanwhile, are on a buying spree on the bourses. Mutual funds bought shares worth a massive Rs 1772 crore in five trading sessions from 20 December to 27 December. Mutual funds, it appears, are putting excess cash to use. Mutual funds’ cash level in November 2006 was at Rs.9000 crores. Of this, Rs 7,500 crore lied with existing mutual funds. The NFOs (new fund offers) cash level was at Rs 1,700 crore. Recently, Reliance Mutual Fund raised about Rs 2100 crore from an equity scheme targeted for investment in small-cap and mid-cap shares.

The near term trigger for the bourses is Q3 December 2006 results. Market men expect December 2006 quarter to be another strong quarter in terms of earnings growth. Strong advance tax payments corroborate the view that Q3 results would be strong. Cement companies and oil firms have paid substantially higher advance tax in the third installment of 15 December 2006. State Bank of India, Tata Steel, Reliance Industries (RIL), Hindalco, L&T, and Cipla have paid substantially higher advance tax in the third installment. The Q3 results would start trickling in from 11 January 2007.

Asian markets were mostly in the green on Friday (29 December). Key benchmark indices in Japan, Singapore and Taiwan were up by between 0.01% to 0.7%.

US stocks finished marginally lower on Thursday as investors sold off recent outperforming stocks to lock in some profits ahead of the year-end. The Dow Jones industrial average declined 9.05 points, or 0.07 percent, to end at 12,501.52. The Standard & Poor's 500 Index dipped 2.11 points, or 0.15 percent, to finish at 1,424.73. The Nasdaq Composite Index dropped 5.65 points, or 0.23 percent, to close at 2,425.57.

Oil prices eased toward $60 on Friday, reversing gains posted on a steeper than expected fall in US crude stocks as exceptionally mild winter weather led the market toward its first annual loss since 2001. US light crude futures fell 11 cents to $60.32 a barrel by 0251 GMT, keeping just above the one-month low of $60.05 hit on Thursday. Brent rose 8 cents to $60.60.