Expect volatility on account of F&O expiry

The Indian equity market closed flat in a volatile session on Wednesday, ahead of the expiry of January derivatives contracts on Thursday; and a US Federal Reserve policy statement due later in the day. The Sensex ended up by 6.44 points or 0.03% at 24,492.39; and the Nifty ended up by 1.6 points or 0.02% at 7,437.75. On the other hand, broader markets outperformed as investors widened their positions, with the small-cap index rising 0.57% and mid-cap index 0.30%. The Indian rupee continued to remain weak against the US dollar and was trading with a loss of 28 paise at 68.02 per US dollar.

U.S. stocks closed more than 1% lower Wednesday, after the Federal Reserve kept interest rates unchanged and said "economic growth slowed" since its last meeting in December. The Dow Jones Industrial Average was down 65 points or 0.4% at 16,095. The S&P 500 declined 2 points, or 0.4%, to 1,895. The Nasdaq Composite tumbled 99.51 points, or 2.2%, to 4468.17.

The Fed said in its policy statement that it is "closely monitoring global economic and financial developments and is assessing their implications for the labour market and inflation, and for the balance of risks to the outlook". The Fed has not given any signal whether it would raise rates at its next meeting in March.

European markets recovered earlier losses on Wednesday, after oil prices jumped owing to supply data; and on hopes that oil producers will cooperate towards cutting output. The Stoxx Europe 600 rose 0.3% to close at 340.24, after trading as low as 335.86 earlier in the day. The U.K’s FTSE 100 added 1.3% to 5,990.37. France’s CAC 40 climbed 0.5% to 4,380.36. Germany’s DAX 30 gained 0.6% to 9,880.82.

Yesterday there was a rebound in crude prices due to data showing a jump in weekly demand for oil products; and news Russia was discussing a possible output pact with OPEC. Brent oil settled up USD 1.30 or 4.09% at USD 33.10 a barrel, while U.S. crude futures ended up 85 cents or 2.70% at USD 32.30 a barrel.

Asian market trimmed losses, but still traded in the mix on Thursday after a late selloff on Wall Street. Japan's Nikkei 225 was up 0.17% after falling as much as 1.01%; while the Kospi index traded flat after dropping as much as 1.1% following market opening. Australia’s S&P/ASX 200 Index climbed 0.7%. Chinese markets opened in the negative territory with the main Shanghai composite down 0.77%.

While on domestic front, A SGX Nifty 50 index future for January Series traded up 17.50 points at 7,449. Indian markets may open flat. Going forward, market may remain volatile during the day owing to F&O expiry today.