With investors preparing for the holidays and many international funds closed until January, Russia's equity markets look set for a quiet last two weeks. But the state may also seek to use the Christmas lull to buy up domestic equities as a consolation boost to finish out 2008.

The state's main bailout vehicle, Vneshekonombank, or VEB, will likely take advantage of the low trading volume on the MICEX and RTS exchanges in the coming days to prop up prices, analysts said, which could mitigate — if briefly — what has been a particularly dismal year for Russian stocks.

The ruble-denominated MICEX Index and dollar-denominated RTS Index are down 65 and 70 percent on the year, respectively.

Vladimir Osakovsky, head of strategy at UniCredit, said the pre-holiday period was a "good time" for VEB to stage a major intervention. On days when few are trading, "the probability of creating a positive movement in the market is much stronger," he said.

VEB, which is charged with loaning billions of rubles to help companies refinance foreign debt, has also been given access to 175 billion rubles from the National Welfare Fund to invest in domestic equities.

The bank, which has already bought 90 billion rubles of domestic stocks and bonds, does not disclose the names of companies in which it invests.

But with Urals crude trading at $36 per barrel Tuesday afternoon, analysts said there was little reason to expect any major state investment in oil companies. Chris Weafer, chief strategist at UralSib, said VEB would focus more on Gazprom and state banks.

Weekday Nontrading Days NYSE: Dec. 24*, Dec. 25, Jan. 1 LSE: Dec. 24*, Dec. 25-26, Dec. 31*, Jan 1 RTS/MICEX: Dec 31*, Jan 1-10 RTS and MICEX reopen on Sunday, Jan. 11. *Denotes shortened trading day. — MT

"The bulk of international funds are already closed and there won't be any sellers, so it will be easier to push prices higher. I think VEB will take advantage of this to push Gazprom, Sberbank and VTB up, and there is a good chance that this push will be reflected in London GDR prices when they open on Monday next week."

How markets move following the long New Year's holiday strongly depends on the interim performance of Russian stocks on Western markets — in the form of American and Global Depository Receipts — as well as any change in crude prices and exchange rates.

"Russian stocks will be trading indirectly during the holidays, so there may be a gap to be closed on Russian domestic markets depending on how London moves," said Alexander Zakharov, head of equities at Metropol.

"We may see jumps on the 12th, especially on the MICEX Index if the dollar strengthens in the first two weeks of January. But if the oil price remains more or less unchanged over the holiday, I don't believe the Russian market will react much," Zakharov said.

The MICEX Index finished up 4.4 percent on Tuesday, while the RTS Index posted a gain of 4.4 percent.

The Central Bank will set the official exchange rates on Jan. 31 and has no plans to change them until the end of the state holidays, a spokesman said Tuesday.

Between now and Jan. 1, however, most expect the Central Bank to continue widening the band in which the ruble trades against a dollar-euro basket. The Central Bank has widened the band nine times since Nov. 11, allowing the ruble to depreciate in small increments.

"There is a need for much stronger devaluation now, and the gradual devaluation policy is unlikely to be interrupted anytime time soon," said Osakovsky, of UniC redit.

He and other analysts said the Central Bank would continue letting the ruble fall after the holidays, although oil prices will determine how far.

"There will be further devaluation after the holidays, that's for sure. It won't be on the first day of opening but within the first working week," Osakovsky said.

"If oil prices recover a lot, then it may be less."