Wednesday, the Indian market may show hectic volatility on alternate bouts of buying and profit taking amid mixed global cues. While domestic investors are likely to tread cautious due to uncertainty on the political front ahead of the outcome of general elections next week, foreign institutional investors have been buying consistently over the past few weeks.

On Tuesday, FIIs bought shares worth Rs.5.08 billion on a net basis, but domestic institutional investors sold shares to an extent of Rs.1, 298.5 million, according to provisional data released by the National Stock Exchange.

The direction of the U.S. index futures and the nature of opening in the European markets may inflence market movement for the day.

Currently, markets across the Asia-Pacific region are trading off their day's highs. China's Shanghai Composite index is up 0.69% and Hong Kong's Hang Seng index is rising 0.70%, but South Korea's KOSPI is trading down 0.14%.

Overnight, the U.S. markets saw some hectic profit taking after the splendid rally stocks had staged in the previous session. However, the major averaged ended the session well off their worst levels of the day following upbeat remarks from the U.S. Federal Reserve Chairman Ben Bernanke. The Dow Jones Industrial Average slipped 0.19%, the Nasdaq Composite edged down 0.54% and the S&P 500 index moved down 0.38%.

Earlier in the day, the Fed Chairman testified before the Joint Economic Committee of Congress, noting that recent data has suggested that the pace of contraction in the U.S. economy may be slowing. He said recent data shows some signs that the beleaguered housing market may be bottoming and noted that the available indicators of business investment remain extremely weak.

Looking forward, Bernanke said economic activity is expected to bottom out then turn up later this year. Nonetheless, he noted that the rate of growth of real economic activity is likely to remain below its longer-run potential for a while.

According to a release from the Institute for Supply Management, ISM's index of activity in the service sector rose to 43.7 in April from 40.8 in March, with a reading below 50 indicating a contraction in the sector. Economists had been expecting a more modest increase to a reading of 42.2.

Meanwhile, the Indian ADRs closed mixed. Sterlite Industries fell 3.15%, Reddy's Laboratories declined 2.05%, HDFC Bank drifted down 2.18% and Infosys edged down 1.04%, but Wipro gained 2.73%, MTNL rose 3.32% and ICICI Bank moved up 1.62%.

Crude oil price dropped on Tuesday after hitting a five-month high as bulging oil inventories and slumping energy demand outweighed fragile hopes for an early economic recovery. After closing at $53.84 a barrel in New York trading overnight, crude oil is now trading at $53.70 a barrel, down 0.26%.

The rupee closed at a two-and-a-half month high of Rs.49.30/31 against the dollar on Tuesday, boosted by a host of reasons such as dollar selling by multinational banks, the weakness of the dollar against other Asian currencies and strong capital inflows from foreign institutional investors. The rupee closed at Rs.49.92/94 in the previous session.

Indian Hotels may move after it bought 2.25 million shares of the New York-listed Orient Express Hotels at $5.75 a share for about Rs.64.65 crore in a market transaction.

Multiplex cinema operators such as Pyramid Saimira, Adlabs Films and PVR may come under selling pressure amid reports that producers and exhibitors have failed to come to an amicable solution in a meeting on Tuesday. These stocks rallied around 3-5% on Tuesday expecting an end to the standoff.

IT stocks may be hit after the U.S. President Barack Obama proposed to tax expenditure by US companies on availing services from outside the country from 2011. Banking stocks may also remain subdued ahead of stress test results of US banks.

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