Inflation is a big cue for the market today. There are no major global cues. If we get a bad surprise from the inflation numbers today, we can break below the low of 3850.
Friday has usually been our undoing as well?
It has but let see where the inflation number comes in and yesterday did not promise many things, so it’s been difficult two days for the market; first, the glimmer of hope and then the way we collapsed yesterday. So if there any bad surprise from the inflation number its easily possible that we breakdown and break even below the lows that we formed early part of the week around 3,850. It’s important that we do not get a negative surprise from inflation today.
Asian Indices:
There is not much happening in Asia this morning, moves are very quiet. Nikkei is down about 0.5%, Hang Seng is the one market which is standing out little strong. The other markets are all down between 0.5% and 1%, so mostly weak but not terribly weak.
We have just been moving this way and that with levels on the Nifty, from being a really weak market, is that the other thing that might happen now that it becomes a two way move?
It could well be but today is quite important day out here because there is some importance which people are attaching to the last low which has been formed because from there at least you got a fairly significant short covering bounce. In any case people might be watching the zone of 3,850 as a first rung of support.
If today the inflation number is pretty much along the expected lines, no negative surprises there and because the US markets are shut, you don’t expect any more bad news from there. The market can hold out above that level. If it falls a little bit but holds up in that band of 3850-3900, at least the bullish traders will go into the next week with a glimmer of hope. But if today for some reason the Nifty say falls a 100 odd points and closes from its low where it got the 200 point bounce day before, then you might be opening up a serious problem out there because then the market or traders will get convinced that no support is holding at all and there is not even an iota of resilience in the market. That can be quite debilitating for the sentiment if not anything else.
I am hoping that the inflation number does not come out to be a shocker and the market holds around these levels by the end of today and if you don’t get a horrible weekly closing because if you do that then maybe there could be another precipitous slide staring at us next week and crude is not cooling down, so sentimentally we are anyways pegged aback quite significantly.
The number for inflation varies this morning between 11.4% all the way up to 12% but the problem is that it is not showing any signs of easing off:
It is not and I do not know what the number will be because once again there are some people who believe it might be dangerously close to the 12% mark, some believe it will be maybe closer to the 11.5% mark but inflation is already at 12%, as we will find out when the provisional numbers get revised few weeks down the line.
I think for all extents and purposes, we are already at 12%. These are sentiment gimmicks on whether you feel good when it is 11.5% and you feel bad if it is 12.01%. These are just numbers which traders will go short or cover up shorts on. The bottomline is you are staring at 12% inflation already and the actual reality is very bad. Can it get worse if you get the 12% number delivered today? - I am sure it will be because the bond market has already had a very nervous run up to today’s inflation number, bond yields are very high.
When the first repo shocker came, bond yields dashed up to 8.75 and then they cooled down to almost 8.5 and now over the last couple of days there has been resurgence in bond yields again. So if you get 12% inflation then who is to say that you do not take another step forward towards that 9% yield, which is psychologically important. If we do that I think rate sensitives will continue their underperformance. You have got a monetary policy coming up soon with 11.5%-12% inflation wherever we come today, I think we have run the risk of more policy action and bond yields are not going to cool down before that and that means that bank stocks and real estate stocks at best will give you those one-day kind of rallies but they will continue to remain under pressure.
-Udayan Mukherjee, Executive Editor, TV18 |
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