Indian market likely to see considerable volatility

The Indian market may open higher on Friday following favorable cues from the overseas markets. That said, the market might witness considerable volatility ahead of the announcement of the month-long national election results on Saturday.

While reports showing improvement in business confidence and other incipient signs of an economic revival may keep underlying sentiment firm, profit taking ahead of the weekend may result in choppy trading.

After making a net investment of Rs.4, 085 crore on Wednesday, foreign funds sold shares worth Rs.302 crore on a net basis on Thursday, provisional data released by the Bombay Stock Exchange showed. However, domestic financial institutions bought shares worth Rs.254.30 crore on a net basis.

Overnight, the major averages on Wall Street ended the session firmly in positive territory, as investors went bargain hunting following some recent weakness, shrugging off a report from the Labor Department showing a bigger than expected increase in first-time claims for unemployment benefits in the week ended May 9th. The Dow Jones Industrial Average closed up 0.56%, the Nasdaq Composite rose 1.5% and the S&P 500 index gained 1.04%.

The Labor Department said initial jobless claims rose to 637,000 from the previous week's revised figure of 605,000. Economists had been expecting jobless claims to edge up to 610,000 from the 601,000 originally reported for the previous month. A separate report released by the Labor Department showed that producer prices increased by a little more than expected in the month of April, partly due to a rebound in food prices.

A slew of economic data is scheduled to be released on Friday, including the Labor Department's report on consumer price inflation in the month of April. Economists expect consumer prices to come in unchanged after edging down 0.1 percent in March. Trading could also be impacted by the release of reports on industrial production, consumer sentiment, and regional manufacturing activity.

Meanwhile, the Indian ADRs closed mostly higher with the exception of Sterlite Industries. ICICI Bank surged up 6.19%, HDFC Bank rallied 3.95%, Reddy's Laboratories advanced 2.82%, Wipro rose 2.77%, Infosys gained 3.69%, MTNL added 2.41% and Satyam closed up 0.56%, but Sterlite ended down 0.98%.

The rebound on Wall Street overnight helped crude oil futures end higher on Thursday, but the gains were limited as a gloomy forecast for energy demand from Paris-based International Energy Agency weighed on sentiment. It said the rise in oil prices to a six-month high above $60 this week was due to sentiment rather than fundamentals. After settling at $58.62 a barrel in New York trading on Thursday, crude oil is now trading firm at $58.76 in Asian trading.

The rupee closed weaker at Rs.49.83/84 against the dollar on Thursday, weighed down by weakness in the stock market and a stronger dollar overseas.

The Indian market extended its loss on Thursday amid weak global cues and concerns that no single party/coalition will emerge a clear winner in the recently concluded general elections. Additionally, reports showing a further decline in exports in April and rating agency Fitch's warning that India needs to cut its budget deficit to avoid having its credit rating lowered, weighed on sentiment. After moving choppily in a range of 11,936- 11,696, the BSE Sensex closed off the day's lows at 11,873, down 147 points or 1.22%. Likewise, the S&P CNX Nifty recouped some of its loss to finish at 3,594, down 42 points or 1.15%.