Markets may look green in near-term

Market Outlook - Short Term

Posted by : Udayan Mukherjee

View full thread (2 messages)

Tracked by: 2 Boarder

Today is the fourth day following the rally in the markets and hope this rally will continue for tomorrow also. The big cue today is undoubtedly politics and the markets are looking strong as they believe that the UPA (United Progressive Alliance) will not falter.

The market will rally today if the UPA makes it or may pause for some time and then rally again for tomorrow's trading session. In the near-term, the screen looks green and hopefully it will not be red.

Our markets:

The market is going in pretty strong, I think it believes genuinely that the UPA has the numbers and the market is a smart beast, I don’t think it is swayed by one set of opinion or another. It’s probably worked out the numbers and has come to the conclusion that it will have to be a big surprise, if the United Progressive Alliance (UPA) does not make it this time around.

What you play for this morning is whether the market will rally some more going into the event, if the conviction levels have risen that the UPA will actually make it or will it actually pause today by the end of the day and then keep some part of the rally for tomorrow.

Either way it looks like the market is in good kind of frame of mind and in the near-term you should see some more green on the screen rather than red. Of courses surprises might come later this evening but it appears that it may not 9 out of 10 people on the street will tell you that, they have the numbers and the screen should be green for the next couple of days.

Asian Indices:

Global markets are actually flat this morning; there is not a whole lot to take away from. They are rallied very hard, most of Asia yesterday and Japan that was shut yesterday is catching up today. So that is the only one that is holding up in the green, up almost 1.5%.

On vote of confidence:

The body language seems to be favouring the Congress as well, the United Progressive Alliance (UPA) as well. You are getting that sense from whatever is going around in the newspapers and on the news channels that maybe the UPA does have the edge and the market seems convinced more importantly that would be the case. Whoever you talk to, the general feeling is that it is probably a done deal otherwise the market usually does not stick its neck out to this extent. We have rallied 9% in the last three days that is not insignificant. So we could have a 2%-3% rally with l the marginal punters sticking his neck out but the way shorts have got covered, the way the markets moved up in the last couple of days, I think it is indicative of the fact that people are saying done deal.

The UPA has the numbers and will float through. There will be lots of talk if the government makes it later tonight about what will happen on the reforms path; maybe a couple of things happen, the easier ones are done by the government and that might lead to some kind of situation where people believe that okay four years they did nothing now probably they are doing a little bit whatever little they can. A little bit of confidence, sentiment, feel good might spread around in the market, it is no more than that.

Materially things will not change because this bear market is not about one insurance FDI going up from 49 to 74%. It is about a lot of other things, which have happened around us, inflation, interest rates, macros, earnings and those remain in place. But can sentiment get lifted?- For sure it could and sentiment is one of the important things, which has led us into this very bearish phase. It is possible that sentiment gets lifted and you have a slightly more benign outlook or environment in the markets for a while. That certainly is possible if the vote goes through.

While one has to agree with the assessment that this is not the make call or break call of this market. In the medium-term, I do not think it should be brushed off as a completely insignificant event either and maybe the ramifications will not end with the day. There could be some ramifications which might linger on either up or down for the next six months.

-Udayan Mukherjee, Managing Editor,CNBC TV18

Nifty holds above 4100

Market Outlook - Short Term

Posted by : Udayan Mukherjee

View full thread (1 messages)

Tracked by: 0 Boarder

It’s been an up and down day for the market; just goes up a bit and comes off because people are on tenterhooks about the vote result which will come in tomorrow evening. Nobody wants to stick his neck out which is why volumes are low and it’s a flip flop kind of an activity which we are seeing since morning that too on a day when global markets have been very supportive. We are up barely 0.5% and even the midcap index is not gone anywhere, in fact the breadth has been bad.

Results have been coming in through the day as well so there have been some hits and misses there. But broadly pretty much what we expected to see in a range, volatile and low participation before the big event.

It’s fine that we are 80-90 points higher on the Sensex. If we close around these levels, I do not think it’s a bad outcome. The more you look at the market it seems like the people are generally veering towards the belief that the government might pull through this confidence vote otherwise the market would not have been here. Because there have been a couple of cracks which have opened up since morning and they have all been filled up and the market tends to bounce back. So the fact that it is holding around 13,700 or more than 4,100 for the Nifty, which is probably indicative of the fact that people are more hopeful than hopeless about tomorrow’s outcome. So it’s not a bad outcome.

Would you have expected to see a big major rally today? That would have been a little unlikely given that there is an event risk around so the low volumes are easily explained. But equally I do not think people are sticking their necks out right now before they see the result of what happens tomorrow. So pretty much inline with the expectations the way today’s trade has panned out and wouldn’t be surprised if the market strengthens a bit given that it hasn’t cracked so far during the day.

-Udayan Mukherjee, Managing Editor,CNBC TV18

UPA trust vote big cue for next 48 hrs

Market Outlook - Short Term

Posted by : Udayan Mukherjee

View full thread (3 messages)

Tracked by: 0 Boarder

The big cue this week would be the trust vote for the UPA. The big question is will the government continue?. In the next 48 hours or so, the most important news will be the trust vote.

The big Sensex companies will come out with their earnings this week. There will be short-term moves; there will be cues and people will pick up either way - that is even if the goverment falls or stays on.

And that’s the thing politics is just hanging the heaviest this morning or maybe even this week?

Yes that’s the big cue maybe not for the medium-term or the long-term because maybe in a week, ten-days that would have seized to be the big cue for the market because whatever happens will be priced in very swiftly because the market has had lot of time to debate on and deliberate on that and therefore either way people know what to do or how to price it in. I don’t think the reactions will last more than either way 5-7 days or 7-10 trading sessions.

In the short-term it is the most important cue. The next 5% move is almost inevitably going to be because of what happens on Tuesday night but will the next 15% move happen on back of that, I doubt that very much. In the medium-term this may not be the biggest factor those still squarely remain what happens to crude, what happens to global equities, what happens to fund flows etc and macros.

For the next 48-hours you will hear only one thing and that’s the shrill cry of politics and that will determine what we do in the second half of this trading week.

Asian Indices:

Very good morning across Asia and if you are looking for initial cues then those would have to be in the green. Good timing too most markets are up about 3% a piece. So very strong rallies probably led by the cool-off in crude, out there.

In the very near-term though this is a sticky spot the market will have to work through on the political front?

It will but it is indeterminate, if you just try to map it for the next couple of days I don’t see how you can do that because everybody has got his own take on the numbers whether they add up or not. There are lots of other possibilities, which are being discussed on how the Prime Minister might approach this whole situation. The Mayawati factor has come in and that always sends shivers down the markets spine but I am no great expert on politics, but having seen how some of the predictions have come on political events in the past and how they have eventually turned out, my own submission is that is not easy to game these things at all.

Like elections, like markets near-term politics is very difficult to call, so the chances of going wrong on a call, is very high. The market is going in reasonably strong into the event but I think you could be surprised either way by depending on the position that you are taking.

Can we sit on Monday morning and even say there is a 65% probability of one event versus the other, I think not, it is probably closer to 50-50 and that makes it very difficult for trade to pan out over the next couple of days till we get to the resolution for the event because there are still many possibilities up in the air. So it is a toss of a coin it is like gambling, at best you can buy some protection for your portfolios and hope things don’t turn out too ugly for you. But otherwise it seems like it is absolutely impossible to call and my suggestion would be do not try and trade this event. People will inevitably but it is very easy to go wrong with these kinds of predictions and they are far from certain, so stick your neck out and take a bullish or bearish call before the event I think is fraught with a lot of uncertainty and you can easily loss a lot of money.

The point is we come back on Wednesday morning to trade with the event under our belt, so it will almost inevitably be a gap up or gap down on Wednesday and you could be knocked out quite seriously.

That’s the thing about the timing though. By the end of last week we are a bit momentum building for us assuming things work out to in whichever way by the end of Wednesday. Can we get back to where we started on Thursday or Friday?

It depends on how things pan out. My sense is that you can go on talking about possibilities but at the end of the day there are only two possibilities. Does the government survive or does it not survive and what the market possibilities given one outcome or the other.

-Udayan Mukherjee, Managing Editor,CNBC TV18