Sensex likely to remain volatile

Share prices across the country's bourses are expected to remain volatile this week after the market lost some of the momentum last week, stung by the National Stock Exchange's move to impose additional margins in both the cash and derivative segments.

The Bombay Stock Exchange index, the Sensex, lost 1.2 per cent to finish at 4,911.76 points last week. On the National Stock Exchange, the Nifty index closed at 1,562.80 points, down 1.8 per cent on the week. Both exchanges remained open for a half-day trading session on Saturday to enable the NSE to test its back-up facilities in Chennai.

"The market is in a correction mode after a sharp rally. We expect the Sensex to go down to 4,650 level in the next couple of weeks," said the head of institutional sales at a leading brokerage.

The benchmark index took heavy beating as market players reduced their exposure in the market, following broker-specific margins imposed on a section of players by the NSE.

Adding to the market woes, domestic funds have been offloading shares to meet growing redemption demand from investors. According to reports, Indian funds have pulled out over Rs5 billion from the equity market since the beginning of this month.

Many retail investors are waiting for a correction in the benchmark index to make an entry. Some analysts believe that mid cap stocks may take a breather after the sharp upswing in the past few days. Of late, investors have turned their focus on low-priced stocks that have strong fundamentals.

"We advise our clients to refrain from taking any fresh positions as the Sensex is expected to shed another 50-100 points before bouncing back," said a dealer. He said the overall outlook for the market remained healthy and sound.

Prospects for the telecom sector look brighter on reports that the foreign investment limit in telecom may be raised to 74 per cent from the current 49 per cent immediately after the assembly elections in five states.

The cabinet had postponed the decision to raise the FDI cap at its last meeting because of strong protest from the coalition parties.

Meanwhile, Indian stocks rose for the first day in four. Reliance Industries Ltd and Hindustan Lever Ltd led gains amongst the heaviest stocks in the index.

The Sensitive Index rose 59.48, or 1.2 per cent, to 4925.31. The National Stock Exchange and Bombay Stock Exchange, held a two-hour trading session yesterday, reports Bloomberg.

Reliance rose Rs4.3, or 0.9 per cent, to Rs468.7. Hindustan Lever Ltd, India's largest consumer company, gained Rs1.65, or 0.9 per cent, to Rs183.2.