We are in the midst of a pullback in our markets and the global cues are mixed while the US did not have a great night overnight. Asia is actually not looking too bad; it’s turning around. So maybe we will get some help particularly from markets like China which sold down yesterday. In any case the mood is of a pullback and a relief rally here, that extended well yesterday and hopefully there is little bit left in the Nifty in this pullback.
Q: Yesterday we did a lot of (pullback) on our own steam as well?
A: We seem to be in the midst of nice little relief rally; it looks good when this relief rally happens because the attendant short covering, and oversold stocks when they bounce back - they give an impression that all is well with the market once again.
Not quite sure that is the case. But in the near-term the kind of pullback that everybody was expecting and talking about seems to be fructifying finally. So the target was set at about 4,750; we are 100 points away from there. We may easily take another small step towards it this morning - who knows how the second half will pan out. But so far so good for the Nifty and it seems like it will continue the upward journey just yet. We will watch at higher levels if we get pass 4,700 whether the bears are coming back into play or whether the bulls are getting cautious and taking their profits. It would be interesting to see how both the bulls and the bears position themselves if the Nifty is above 4,700 and from thereon.
Asia started weak on the back of the US cues but they have all rebounded and the biggest rebound is happening in the weakest market of them all, which is China. China sold off yesterday, it sold down 2% this morning for starters and is now up 2.7%, so that is looking good. Hang Seng bounced about 170 points, Korea is up half a percent, Japanese market is up half a percent all leading to hopes that we will also strike out a positive opening which should take us closer to that 4,700 mark.
Q: What about the Nifty itself, the action is slowly gravitating towards 4,600 now? Can we move higher?
A: We did cross 4,600 quite decisively yesterday - 4,650. So now we are getting to 4,700 and more than 4,700. The only thing is that as we were discussing yesterday there is quite a bit of consensus around that 4,700-4,750 kind of levels. So every trader has got his eye at 4,750, around that I think one will see quite a bit of action happening in the market.
When there is so much consensus about a trading level I do not know one of two things look likely either we will not get to 4,750-but that looks a little unlikely because we are going to start the day probably close to 4,700 already and we are almost there-so if that does not hold then the other option is whether we stop at 4,750 or overshoot it. I think that is quite a possibility if in the next few days global markets are supportive and crude continue to be slightly on the southward side. One could see this rally extend that is certainly a possibility because if everybody is drawing the line at 4,700-4,750 then who knows can the Nifty surprise go to 4,800-4,900 in this run and just clean up some more of the shorts? It is quite possible.
One should keep his eyes open for any kind of surprise on the way up, it is still looking very much like a relief pullback from oversold ground. But as we have seen in the past in the last pullback as well, wherever people draw the first line of resistance on the way up, sometimes the market pierces those levels and go up to slightly higher levels even if they have to correct after that they do go and surprise a bit on the way up. So I think the extent of short covering might still continue and one may get to higher levels. But let us take it one step at a time. As we started by saying, let us get to 4,700-4,750 first and then see whether the bulls are stronger or the bears are at that point.
-Udayan Mukherjee, Executive Editor, TV18 |
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