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Inflation numbers were a relief and seem to consolidating if not falling. However, global cues are still bad and may peg the market down. The local cues though are good and there are a few silver linings that might cushion the fall. But the Nifty is likely to fall 80-100 points.
On trade today:
On the last trading day of this week, there is little bit of hope from inflation there is more than little bit of hope from the Nuclear Suppliers Group (NSG) front but sadly global markets are not playing along. So that’s the battle for the market this morning.
The local cues are not too bad from an India’s specific point of view there is some hope on the horizon. However, the global cues will almost certainly peg us back as we start trade this morning. So early morning difficulties for sure let’s see what we make of it by the end of the day.
Our markets:
We did give up a little bit of ground and maybe we will give up a little bit more and maybe it’s in the fitness of things because we did rally quite sharply all the way up to 4,500, 15,000 came all too easily and therefore the market probably would have been made to do some more work around these levels and so maybe it’s just as well that we are giving up a little bit ground but as I said from an India’s specific point of view I think there are some silver linings to the cloud right now, we hear that the Nuclear Suppliers Group (NSG) situation is a bit better, which might lift sentiment as we come back to trade next week. Inflation is showing some signs of plateauing if not falling over the last couple of weeks. All of this put together might somewhat cushion our fall a little bit. In any case we have been outperforming most of the other global markets but fall, we will this morning with the rest of the world. So at least 80-100 point cut in the Nifty cannot be wished away.
However let’s see in the remaining part of the day we can use some of the silver linings as crutches to claw back somewhat. It’s not looking like a disastrous market but sadly we will have to fall in line with the globe.
Asian Indices:
Asia is weak as one would have expected because the US fall was crunching; 3% down in the Dow Jones and the S&P (Standard & Poor's). So the cuts are not insignificant across Asia; 2% down on average. Some markets are not doing too badly across Asia but others are. So China and Hong Kong are suffering quite a bit as Japan, though Korea hasn’t fallen quite such a lot, Taiwan has been bruised over the last few days so that’s a market which has fallen already but sticky across Asia.
Worsening global cues:
It is happening despite crude having cooled off such a bit, commodities have cooled down quite a bit and generally globally people are talking much less about inflation then they were one-month back but as a lot of people had been forecasting a month back that the global problem is not just a commodity problem today, there are many other problems and slowly people are waking up to that. The kind of reaction that you saw from the US market yesterday, I don’t think jobless numbers were so bad but it didn’t look like the kind of number which should have sent the Dow and the S&P 500 down 3% although there are apprehensions about what the Unemployment Report might actually put out today and Bill Gross, CIO of Pimco, who is a fairly respected voice out there did speak about financial tsunami which maybe in the offing but I didn’t think there was enough to send the markets down too much.
My sense is that there is just too much edginess in the global market out there. So despite crude hovering closer to USD 100/bbl now than USD 150/bbl, you are still seeing these kind of big falls happening in the US market and the Dow is just unable to get past 11,700 it goes there and then these sharp kind of sell-offs happen. Things are not looking very good for global markets you have seen how much Asia has fallen over the last few days, I think generally across the world people are worrying more about a big economic growth slowdown across the world and continuous de-leveraging which is happening from the financial institutions. So, both from liquidity and from a macro perspective, this global situation is not looking too good and sadly we can’t ignore it though India has been outperforming over the last few days as is well documented but even so to ignore it completely would be quite difficult. So, maybe we will fall 80-100 points on the Nifty this morning.
-Udayan Mukherjee, Managing Editor,CNBC TV18
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The market momentum may pause a bit today. Crude is still around the USD 109-110 per barrel level and has not yet dipped to USD 100 per barrel. Global cues have not been supportive enough to see a rally in the market. There also is a lot of apprehension surrounding the NSG (Nuclear Supplier’s Group) meet. However, a pause in the market will be good for the market.
Does the environment seem conducive then to pick up Tuesday’s good work?
We may pause a bit because last couple of days global markets have not exactly been supportive, crude after going down to USD 105-106/bbl has not collapsed to USD 100/bbl. There might be a little bit of apprehension around that NSG meet over the next couple of days and of course we have got inflation as well and we have got perhaps some good news, which could come in from the Union cabinet from New Delhi over the next day or two.
So, it’s a mixed bag out there. It would be good if we pause a little bit before moving further ahead but who knows with momentum you never know and there were clear signs of momentum on Tuesday for sure.
Asian Indices:
Asia is not looking great; yesterday was a bad day across Asia and today too Taiwan is down 1.25%, Hang Seng holding almost a 1% cut, China is down three fourth of a percent and Nikkei is down 0.5% as well. For the second day running Asian markets are looking a bit sluggish.
On global enviornemnt:
Global environment is not nearly as strong as us; it’s looking quite sticky. The Dow despite the crude price at USD 106-107/bbl which is where it fell to is just not crossing through that congestion zone of 11,700-11,800; its got stuck there many times, the Dow Jones index. So one is not getting a clear sense breakout in the US markets either and that is a subject of a bit of a discomfort for sure.
Crude has fallen quite a bit but we need to see if after stabilising or spending sometime between USD 105-109/bbl like the last few times where every consolidation is lead to a low level in crude over the last few weeks whether crude falls once again and maybe this time go and touches USD 100/bbl mark.
These are all things which will probably determine where our markets are headed in the near-term. It’s difficult to gauge what’s going on in the US because one hears good news and bad news at the same time; factory orders data is not bad but the auto numbers are terrible and on the margin some hedge funds going burst as well – one do not know what to make of it. Those are not the huge fund or anything like that. So mixed cues but one thing is for sure that despite this precipitous fall in the crude price global markets haven’t exactly broken out or anything like that and that remains a bit of a worrying concern for us.
On Nifty:
The mood will be good and while two days of bunched up global falls might be weighing on sentiment a little bit early in the day. It is possible that we give up a little bit ground now in the first half of a trading session, consolidate somewhat between 4,400 and 4,500 before we move ahead. But the momentum is quite strong and more than the price jump which happened on Tuesday, volumes picked up to such an extent that one can sense that because of crude coming down so much, a lot of people are finding confidence to get back into the market. So, if there is a morning dip or first up dip, it is entirely possible that a lot of people would use that dip to enter the market once again, predicting or anticipating higher levels. One could see that kind of trade play out quite easily despite the slightly mixed global cues, which are coming in.
The question is having rallied to 4,500 on the Nifty, do you rally straight to 4,650 over the next few days which was our last high or does the market need to give up some ground maybe come back closer to 4,400-4,450 those levels, which we thought will be difficult to cross but which the market crossed effortlessly with one big leap on Tuesday. Whether around those levels the market could need to spend some time to test those supports right now before it can move back and keep its eventual date if it has to with 4,650 or 4,800 whatever. For the moment I think the momentum is quite strong but do not rule out a bit of a pause because the journey has been quite strict on the way up as well.
-Udayan Mukherjee, Managing Editor,CNBC TV18
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The Gustav storm threat has weakened; it seems that the markets had factored that in. With the US markets closed yesterday, the key cue would be the storm. But Indian markets may take a step forward today; one may see an attempt at 4400 levels on the Nifty. The day should not be too bad for the markets.
On the storm Gustav:
Gustav has weakened and that’s the top story this morning. That was all that we were watching last evening and it fell to USD 110/bbl crude because now from Category 3 it’s Category 2, whatever that means. Meaning basically the storm has weakened considerably and while the Dow and the Nasdaq were shut overnight, this is a key cue for us this morning. Maybe the market had a whiff of it yesterday and therefore it rallied off at the lows of the day. So that’s pretty much your backdrop as you go into trade, Asian markets are mixed but crude is at a USD 111/bbl.
A good backdrop:
One could see that the market had a sense early in the day yesterday because we went up to USD 117/bbl in the middle of the trading session and then came off to USD 114/bbl and the market in its wisdom figured out that maybe something is happening with the storm there otherwise why would crude have cooled down in the middle of the day.
That bet was taken and it’s turned out to be a good bet. I do not know what the reaction to some Asian markets could be but India should hold firm there is no reason for us to slip off today maybe we can take a small step towards 4,400 but the day should not be too bad.
Asian Indices:
Asia is quiet; a couple of markets are down, a couple of them are up so nothing special is going on there. The biggest loser is Taiwan – down 1.5%, other markets are fairly quiet despite crude cooling down, and no great cues from there. SGX (Singapore Exchange Ltd) Nifty is also suggesting a quiet opening just about 11-12 points higher.
Does crude have a potential to be a bigger catalyst?
Its been our biggest friend ironically over the last few weeks and probably single handedly responsible for the pullback that we have seen in our market, so its very comforting to see it repeatedly going back to that USD 110/bbl. One would have to say that in the last one month, the way crude has moved, it seems to have weakened considerably and the rallies are just not sustaining hurricane or no hurricane. One is getting a comfortable feeling and a comforting feeling for the moment for crude but you never know with these commodities, it’s about the most difficult thing in the world to predict the price of crude.
Having said that, even the ten-year bold yield is just grinding down to 8.5% at the slightest provocation, its interesting, the bond market is off the view too that crude is done for the moment, inflation may also start peaking off. It may not peaked yet but market’s see ahead so maybe the market is seeing a few months ahead and saying you don’t have much to go, maybe just about a percentage point on inflation.
Crude close to USD 112/bbl coinciding with nearly 8.5% bond yield, I think this is the stuff which the stock market wants to see for some more time and therefore I wouldn’t be surprised if in this morning too you would see interest once again in the interest rate sensitives because the inverse correlation is playing out quite well with the price of crude and some of these bank stocks. We could see some excitement there which nudges the market higher but it could have swung either ways, last couple of days, crude could have easily gone to USD 125/bbl and that could have driven us back to 4,200 if not lower. But that’s not happened so, it’s a happy co-incidence.
-Udayan Mukherjee, Managing Editor,CNBC TV18
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There are bad cues from global markets. It will be a truncated week of trade and Friday's mood may be punctured. Markets will still be within a trading range and it will be tough to break earlier levels.
Friday’s closing was terrific but things have not exactly been very good over the weekend. This morning we come in with some fairly bad cues from the global markets. Tropical storm Gustav is threatening to wreak havoc with crude oil price as well. So that is a big thing to watch over the next couple of hours. We have got a truncated week of trading out here, but Friday’s mood might just puncture a little bit as we go into trade this morning. No panic but not as euphoric as the note that we closed Friday end.
On last week’s trade:
Friday was very good, the first part of last week was not great but Friday we had a terrific rally and I think it might have raised hopes that the market might get out of its trading range and pierce through that 4,400-4,450 barrier that we are getting stuck in on the Nifty. But this morning we will get pegged back again maybe sub-4,300 once again and then take it from there.
So despite Friday’s big move up, despite the optimism on the macros towards the end of the week, I suspect that we are still within a trading range, the range which has held for a couple of weeks now and despite Friday’s push it might be tough for the Nifty to break pass those levels that we just spoke about. So maybe a soft start could be a bounce back after that but essentially within a range still.
Asian Indices:
The bad news is from global markets this morning. The US did not do very well on Friday though it is shut tonight; the cuts are quite deep across Asia. Almost 3% cuts in a few markets like China, Taiwan, Korea and the Hang Seng has recovered somewhat, but it is still down about 300 points. So between 1.5-3% that is the extent of the fall in Asian markets today.
On Nifty:
Nifty looks range bound. Last week, the range threatened to break on both sides, the first half of the week, we went down to 4,200 and it looked like that the 4,200-4,400 range could break on the way down, then we got the inflation number which the market liked and we saw a huge short covering rally which brought us back to nearly 4,400, and now we are pushing against the top end of the trading range.
Like last week when 4,200 also looked like it would break and we would go down below that range. I think this time too we may seem like breaking that range of the top end at around 4,400 or 4,450, or we may not end up doing that. Despite the volatility and the sharp swing of the last few days, my guess is that we are still in that trading range and we haven’t successfully been able to break out.
This morning we will get pegged back, 4,360 is where we closed on Friday, every possibility that we start the day at 4,300 or maybe even slightly even lower than that and because the bulls have charged since Friday, you could see a bit of covering and the bulls coming back and buying the Nifty below 4,300 which could lead to a bit of bounce back.
But essentially, today’s market is 4,300 around which you will see volatility and a bit of a trading, maybe over the next couple of days unless if crude behaves it self, which is a big question, you do get to 4,400 plus kind of levels but does the market have enough steam left in it right now to break past that level and go back to 4,650, I am not quite sure just yet. We will wait and watch but right now we need to resign ourselves for more volatility within that 200 point trading range of 4,200 and 4,400 or 4,250 to 4,450 which ever way you call it for the Nifty.
Uncertain times for traders but both camps are a little edgy at this point in time, the bulls and the bears, so they don’t know which sign post is going to get taken out.
On GDP numbers:
There was a huge short covering rally which was happening on Friday and therefore the market chose to focus more on the inflation number having come off a bit rather than Gross Domestic Product (GDP) number which was quite soft. So the way it shrugged off the GDP number was quite something on Friday. But the macros are still quite uncertain. At best if one is an optimistic one will say that maybe things are not worsening like in the last few months macros were just getting worse and worse but now maybe the odd positive data point comes out. It’s not worsening at alarming rate that much one can say.
-Udayan Mukherjee, Managing Editor,CNBC TV18
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Inflation, crude, GDP nos may nudge Nifty out of the range
The overwhelming cues in the market today are inflation, F&0 expiry and crude prices. F&O expiry will not do much but other events like crude, inflation and GDP numbers tomorrow may nudge the Nifty out of the narrow range. Overall, there is nervousness in the markets.
It is F&O expiry day today more importantly perhaps it’s inflation day as well and the number comes in after markets close and those are going to be the overwhelming cues as we head into trade. Keep an eye on crude as well because the storm is disturbing it and we are now approaching USD 119/bbl on crude as well. So these are perhaps the most important cues, as we get into trade this Thursday, not necessarily in that order but inflation, F&O expiry with an eye on crude.
Will we break the range?
I don’t know but that’s what people would be asking themselves this morning. My sense is the next couple of days is quite important. We have been extremely range bound for the last few days but may be in the next 48 hours, we have resolution outside that range. There are few triggers may be crude will be the tipping point, may be the inflation number will do it, or the Gross Domestic Product (GDP) number tomorrow, I don’t think the expiry will do much as such. But some of these triggers probably will nudge the Nifty out of that very narrow range.
I don’t know which way, it depends on the outcome of these events but yesterday was a little weak; we gravitated towards the lower end of the trading range. There is a touch of nervousness as we go into trade today by the time the week is out, may be traders will say we found direction one way or the other.
Asian Indices:
Asia is not exactly roaring this morning in fact the Hang Seng index is down 1.25%, China is limping back from the losses of the last couple of days, and the other markets are down 0.25%-0.50%. So they looked up for a bit this morning but now have drifted down into the red once again, so it is a sticky global environment.
Narrowing Nifty range:
It’s come down to the lower end of the range yesterday to 4,290 which is why probably getting important and getting tipped to that point where something will give in the next couple of days and we will either go up above 4,400 or go down to 4,200. It looks like a possibility that the range is about to get broken over the next few days.
These kind of narrow ranges do not stick around for a very long time but if traders are trading long and I suspect a lot of traders are still saying that the uptrend which started at 3,800 and took the Nifty to 4,600 has not quite ended yet; they have not thrown in the towel on that. A lot of people are looking at this as a mere retracement of that rise which happened and maybe there is more to go on the way up. For them the margin of safety is no more than 100-150 points on the Nifty from here. Below that one will start seeing some signs of panic.
We have had a big knee jerk rally from there we have given up quite a bit of ground but there is no panic in the market right now. But if for some reason in the next couple of days the Nifty were to go down to 4,200 below that 4,150 below that which is 100-150 points from here for whatever reason then one will start seeing the bears getting active. One feature which has been consistent over the last few weeks is that the bears are very cautious at this point in time. The Nifty futures discount is not visible that is because the bears are not confident that this pullback which started from 3,800 to 4,600 that has ended conclusively and now they have the liberty and opportunity to go out and short heavily this market again. That view will probably gain ground if the Nifty for reason were to break and trade below 4,200-4,150 levels.
My sense is if we do break those levels then the Nifty discount will probably start mounting. The bears will come back into play, the bulls will get weakened considerably and then we could see a far sharper fall which takes the Nifty maybe even sub-4,000 once again but for that something will have to give in the next couple of days for those levels to break. Conversely it could equally happen that there is inflation, positive surprise or a GDP (Gross Domestic Product) surprise in the next two days and as we start the series the bulls get back into play and push the Nifty successfully above 4,400.
But both are possibilities, which is why there is edginess in the market but if one of these events were to go wrong then I suspect one could see the lower end of the trend of the trading range breaking down.
The Nifty is precariously poised; I know its very boring for the last few days but maybe not for much longer. One could probably see one of the two camps getting stronger bulls or bears over the next 48 hours.
-Udayan Mukherjee, Managing Editor,CNBC TV18
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There is no excitement visible in the markets. Cues from global markets are also not that great. But, there is a lot of deal flow and promise of more deal flows going ahead. Markets will be stuck in a range till F&O expiry and are not in a mood to move in any significant direction.
We are headed towards settlement and the expiry for this series but no great excitement has been visible in the market for the last couple of days. This week has been one of the most tepid run-ups to a futures and options settlement in terms of participation and turnover.
This morning though, we don’t have great cues from the global markets just flat in the US and flat to positive across Asia, the crude is trading above USD 116/bbl again which will not please markets given that it had slipped to about USD 113/bbl yesterday. But there is quite a bit of deal flow and the promise of more deal flow, which is swirling around in the market.
Our markets:
We will still be stuck in a range till this expiry is done that seems to be the general direction, which is coming out that the market is not in a mood to move very significantly in either direction just till this expiry is over. After that we will have to revisit and see what the new triggers which are coming through are, where crude is, where global markets are, all of that.
But in the near-term the traders and investors are doing are focusing on individual stocks, even in the futures market the rollover in stock future is much better. There is a lot of deal flow which is happening, which is quite unusual for the month of August. This is typically a month, where you don’t see much news flow but with Infosys, with ONGC, with the promise of Firstsource there is quite a bit of interesting Mergers and Acquisitions (M&A) type action, which is going on in the markets. So that is something which keep us warm till the markets remain in this boring range.
Asian Indices:
Asia is okay this morning, the US is flat but Asia is a bit of a mixed bag. Japan is down but the Hang Seng is holding out. China continues to slip now drifting down towards the 2,300 mark the Shanghai index. Korea is just flat; Taiwan is up quite a bit. It is a bit of a mixed bag but nothing special, which is coming in. It is crude that one needs to watch which is edging towards USD 117/bbl mark.
How are we poised to open today?
Flattish, and I won’t be surprised if the market remains quite flattish next couple of days. By flattish you would have to say 50-70 points this way and that on the Nifty because that’s what you are seeing for the last couple of days that there is a reluctance to move in either direction. It’s not betraying too much weakness either and at best it’s gone completely sideways. Yesterday, the global cues were bad we started with a bit of a gap down but it did not sustain there sub 4,300 once again a bit of short covering happened, a bit of buying crept in and the markets managed to bounce back to those 4,330 kind of level and the day before you saw an attempt to go to 4,400 that did not last either.
It is not that the screen is betraying strength or weakness it is just saying that it is not ready to move in either direction, so you are probably better off expecting a very flat kind of market. So, in the next couple of days till we settle, the settlement should be in that broad range of 4,300-4,400 or 4,250-4,400. It would be surprising if the market made a settlement by tomorrow or either side of 4,400 or 4,250. That seems to be what’s going on but even yesterday you could see that there is a little bit of trading interest in individual stocks, so the odd Polaris, the odd Punj Lloyd, the odd Firstsource they were darting around.
It is not a completely comatose market but the fact that we are trading at one of the lowest volumes in settlement week is indicative of the fact that the market maybe just not sure which way we are going from here.
-Udayan Mukherjee, Managing Editor,CNBC TV18
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Volumes and participation is very low in the markets. Global cues are not supportive and institutional participation is very weak. There are no great triggers for markets going ahead. Overall, it is a dull market and markets will witness lackluster trade.
It’s only two days before futures and options settlement but one can’t guess that looking at the turnover that we are witnessing right now. The volumes and participation are very low. This morning the cues aren’t great; the US markets had another sell-off, Asia is a bit soft and crude is still hanging around USD 115/bbl. Global cues are not very supportive but we have been seeing some really listless trade over the last few sessions.
Our markets
Yesterday the volumes were so tepid, on settlement week I don’t remember seeing these kinds of volumes. We are still seeing 1-2% kind of price moves on an odd day but one shouldn’t read too much into that because if the market had conviction and it was making a solid directional move that too on an expiry week, I think we would have seen that test on the volumes but no reflection there at all, institutional participation is very weak.
We are in a very dull, boring range bound kind of sessions. Every year we go through some of these patches where news flow dries up completely, there are no great triggers for the market and you have a few days of very range bound, listless trading. I suspect we saw some of that last week and maybe this week is one more of such listless trading. Something will have to change globally or locally to perk up the market because right now neither the bulls nor the bears have too much by way of ammunition going for them. I suspect we will have to resign ourselves to another fairly lackluster session of trade.
Asian Indices:
Asian markets are down but they are not down a whole lot considering the kind of brutal sell-off that we saw in the US markets. China which is slipping quite a bit now is down full 2% points the others are just about limping along this morning not down too much but down nevertheless 1-1.5% apiece. The rupee by the way has touched 44 to the dollar that’s something that you need to keep an eye on.
On rupee:
I think it makes a difference to the global guys. 44 to the dollar is something which a lot of the FIIs (Foreign Institutional Investor) might not have bargained for. This month is not been a stellar month in terms of performance but 5% has been taken out from the FII portfolios in the month of August. At a time when all of these global guys or global investors are reassessing which market they need to be in. I think they would be quite skittish about markets where the currency is weakening. So if one looks at a typical FII portfolio for the month of August not quite sure how much the Nifty has done in the month of August but I suspect that adjusted in terms of dollar returns, most of these FIIs have not made any money at all.
It’s not a small insignificant thing; in fortnight for the currency to weaken 5% is quite a bit. I suspect that probably holds the key to why the FIIs are still not putting money into India because while they are unsure about maybe valuations after the run-up or their level of conviction is not sorted out despite the pullback from the lows of 3,800 Nifty, I think on the margin the rupee might be playing a bit of a role the fact that 5% of their portfolio or NAV has been taken out by the rupee’s swift move to 44 to the dollar.
Given the way crude prices are moving right now, you think this situation could only worsen a bit?
Don’t know, there are internals in the rupee market as well. There is one large deal, which is happening and if it goes through, might alleviate the pressure a little bit, oil is part of the problem but a few weeks back one was getting a sense that maybe the worst is in place for the rupee for the time being and maybe it could appreciate a little bit despite fairly bad macros that India has at this point. But that has not lasted very long and we have swiftly come back to 44 to dollar. So it remains a little edgy for many of the FIIs.
-Udayan Mukherjee, Managing Editor,CNBC TV18
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The market has been resilient. The Sebi announcement will not make much difference to the market. The markets had moved sideways in the past few days; commodities are up, also global uncertainties have come up again, which is why markets may be sluggish today. The Nifty is likely to drift to sub-4,500 levels today.
Our markets:
It is the last trading day of this week, it is a truncated week and it’s a long weekend we are heading into which might play on the markets mind as we will come back straight on Monday to trade. Added importance is that commodity markets is just beginning to get up its head a little bit and going into a long weekend the market will ponder over that and this morning as we start off we will respond to the non-event the Sebi meeting was yesterday which is another thing that might play on the markets mind
Crude is at USD 117/bbl nearly which is not good news. Global cues are a bit sluggish. Our markets have been a bit sluggish for the last couple of days and let’s see what we can make of it on inflation day and the last trading day of the week today.
Affect of crude on our market:
It is possible and likely that we drift down a bit more. Of course the market has been resilient as one saw yesterday and it’s not falling in line with other markets but maybe there was a bit of hope from Sebi meeting which was built into that as well.
This morning at least the bullish traders will not get in feeling very comfortable because the market has been sideways at best and drifted down in the last two days. Nothing has come out of Sebi meeting which is positive or along the P-Note route which was the expectation, crude is back and commodities have moved up a little bit, global equity markets are a bit uncertain and it’s a long weekend inflation coming in after markets close today.
All of it probably suggests that you could see a two way kind of movement today and I would not be surprised if the markets drifts down somewhat during the course of the day maybe even sub 4,500 but as you can see the dips are being brought, so its not that a Castro strophe is going to happen. Maybe the market will be sluggish today and maybe drift down because of the many cues we spoke about.
Asian Indices:
Asia is a bit mix this morning, no sell offs happening there. The US was a bit subdued, crude has gone up but Asia has not made a whole deal of it and the markets are flattish. On the way up, on the way down nothing has moved more than a fifth of a percent.
Crude and global markets at center stage:
They do, I don’t think our market will like crude back at USD 117/bbl. The key thing to determine right now is whether this is just a technical pullback after a one way slide in crude or whether crude is showing any signs of having put in a temporary bottom around USD 112-113/bbl and is beginning to edge up and settle at a slightly higher range again. I don’t know what is the answer to it because commodity prices are difficult to call but it is entirely conceivable that after collapsing from USD 148/bbl to USD 112/bbl which is a one way move down, a little bit of pull back is on the card.
If one looks at the patterns of the last few times crude has tried to bounce back it has got sold into. So you get those USD 4-5/bbl rallies and everybody thinks its flying again and then crude always goes back and tries to seek a lower low.
So let’s see if its one more those technical pullbacks that is happening right now because if it is and in the next couple of days you see a bump up and takes it closer to USD 120/bbl and then you see another slide back which takes it back to around USD 110/bbl then I think we are okay but if the markets get a sense that USD 112-113/bnbl is it for the moment and crude is not beginning to settle in that USD 112-125/bbl range for the next few weeks, then I suspect that equity markets might begin to sulk a little bit.
So, maybe it’s a pullback because even the currency markets look like they have extended themselves quite a bit on a one way trade and there might be some weakening in the dollar itself in the next few sessions which might coincide with this commodity pullback. It is not just crude, even gold has jumped USD 20/oz, so this has the looks of a technical pullback in the commodity market and no more at this point but we will get confirmation over the next few sessions.
-Udayan Mukherjee, Managing Editor,CNBC TV18
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Global cues not very supportive, given what happened in the US and hence the mild cut across Asia. But the good news today is 39 more stocks for traders to trade in; the other big news is the much awaited Sebi board meet today.
On trade:
Another trading day after the little bit of a setback yesterday. This morning too the global cues are not very supportive so mild cuts across Asia following what happened in the US overnight. Crude is stuck at USD 113/bbl. The good news is that there are 39 more stocks for traders in the stock future segment and that should make things lively at least from a trading perspective over the next couple of days in many of those midcap names.
That might be one corner of the market quite excitable and the other big news which will probably come only at the end of the trading day today is that much awaited Sebi (Securities and Exchange Board of India) board meeting and what comes through from there.
Lots of triggers for the market today; new stock futures, SEBI meeting but initially in the morning a bit of a setback from the global markets. Let’s see what we make of all of it.
A tricky start to the morning session:
The start might well be tricky because yesterday too we gave up a little bit of ground and today that might well continue, we might give up a little bit more ground and get closer to that 4,500 mark on the Nifty. But sentiment is not terribly bad right now. If you ask people on the street, are they completely running scared right now of a big fall in the market? I do not think that is the case. So generally people are looking at opportunities to go long once again. So yes, the start will be weak but you will see excitement in many of those new stock futures I presume, so the breadth of the market may not be too bad.
As we get closer to the end of the session today, once again expectations from the Sebi board meeting will probably take center stage again. So I do not know might be a touch of volatility after a weak opening this morning but so far this is being looked upon as a retracement to the very sharp rally that we have seen and no more at least at this stage.
Asian Indices:
Asia is not looking very good this morning, in fact sharp cuts in the Japanese and Chinese markets. Japan had bad macro data, so has been pegged back 2.5%. China is still hitting fresh lows out there and the Chinese index is now below the 2,400 mark which is not very comforting. Other markets are okay, not across the board gash across Asia but some markets have been hit quite a bit.
Equation between the euro and the dollar and global equities:
I think that is the all important one we were talking about this yesterday as well, the points that Bhanu Baweja, Head-Research & EM Strategy at UBS, is talking about, if there is a near-term pullback because euro-dollar has come down from 159 to 149, if that goes back to 153-154 as he suggests then I think there is a possibility of commodities bouncing back as well and that might stop the Indian rally on its tracks. Conversely if it is headed towards a one way, towards that 140 to the dollar mark then I suspect that 140 euro to the dollar probably coincides with something very close to USD 100/bbl for crude and that probably coincides with Indian markets at 5,000 Nifty as well.
Depending on which scenario plays out, I think one has a reasonable short of projecting what is going to happen. If it is 140 then I think it is USD 100/bbl for crude very likely then certainly it is likely that we are 5,000 Nifty sooner than one expects. If however this trade that has been around for the last few weeks unwinds and we get back to 153 on the euro, we get back to around USD 125/bbl on crude and we then get pegged back to 4,200 kinds of levels for the Nifty. So that I think is the macro global thing, which is playing out, which is sort of all interconnected as we discussed a while back.
Generally speaking global markets do not seem to have the kind of momentum that India has at this point in time. Most markets are very wishy-washy; Asia is sort of lumbering along. Japan and China are seeing fairly sharp cuts China particularly. It is just a very tepid kind of phrase that global equity markets are going through, India stands out because it has certainly been one of the stronger markets. But that too is linked to what is going on with commodities and that in turn linked to the dollar. So one should keep an eye on those little macros, they will probably determine what happens to us in the near-term.
-Udayan Mukherjee, Managing Editor,CNBC TV18
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Slipping crude remains central cue for markets
Global cues are quiet. Crude is still slipping and it’s now below USD 114 per barrel taking a whole host of commodities with it and that’s the central cue for the markets this morning.
The market is in the midst of a fairly significant up-move from the lows of 3,800 and that will continue. Commodity markets cooling off is lending a bit of a helping hand to the market.
Markets going strong; 21% up from lows in July:
Looks good for a bit more, our markets have been in a perfect inverse co-relation with commodity markets and that is something people were talking about even before crude started slipping that is the key thing to monitor for us and it has played true to form; the more crude falls, the more commodity slips off the better India does.
We have stood out in the last one month as one of the best performers in the global equity markets and that is not entirely unexpected given the way commodities have moved. We have not been so sensitive to other global market movements barring that central one, which is commodities and as long as that is heading down chances are this upmove will continue. It doest look quite spectacular from the lows 21-22% but who is to say if there is not another 5-7-8-10% left in this.
Asian Indices:
Asia is a bit of a mixed bag this morning no great response to crude cooling down some more. Japan is very quite, so is Korea, Taiwan is down a bit, Hang Seng is up a bit and China is stable thankfully after that big drubbing yesterday, not much that we can take away it’s a very mixed bag and even the SGX Nifty is signaling a fairly flattish kind of an opening for us.
Crude is the big cue:
It’s a big cue and it’s not a small cut which has happened in crude. When markets fall more than 20%, in the west they say it’s a bear market and crude’s fallen 23%. So I don’t know whether that qualifies for a bear market in crude and that’s the big question.
While everybody says okay crude will fall and then bounce back but the question certainly deserves to be asked on whether crude is entering a bear market of its own which will have its own rallies but is the peak in place for crude and if the answer for that is yes then a lot of things change for our market as well. But we don’t know the answer to that yet, it’s been a bigger than anticipated fall perhaps but we don’t know whether the peaks have been seen in the crude oil market.
The thing about the crude market and the movements right now us that it’s not stopping at any support level. First we heard that USD 123/bbl was a very important support and it sliced through. Then it was USD 120/bbl, which also broke. Then people said at USD 117/bbl it will stop and it didn’t stop there and now we are talking USD 108/bbl. These are technical levels which keep coming and going and the market is not posing beyond a day or two at any of those levels and that tells you that that market is weak.
These are technicals and I don’t know where crude will finally bottom out and whether it will give us a vicious snap back from there and whether it now starts going into arrange and consolidating in that range and what that range is but that is absolutely crucial for a market like ours.
One can see the signs, just look at the evidence of the last four weeks since the middle of July, India is up 21%-22% but if one looks at the other Asian markets, Hang Seng’s up 4%, the Kospi’s up 5%, China is actually down from the middle of July, its hit a fresh low. So none of the other Asian markets have actually moved higher in this last one month barring with the exception of India and India has a history of the last 6-7 months of being the weakest Asian market along with China.
So, we are centrally linked to crude at this point in time and fairly so because our underperformance has a lot to do with the last 6-7 months. The market is pretty much now saying that, “I don’t care much about Dow and what the Nasdaq does or what the Hang Seng does. I just care about one parameter for the moment which is crude which pegged me back for the first half of the year and if that is going to sub USD 100/bbl, then I am going higher” and that is pretty much the way the market is playing out. So we have to be focused on one parameter and ask those questions again and again, on whether crude’s broken down its bull market or whether it’s too early to pass that judgment.
Is that impacting money supply across the globe?
It is and the most important trade or shift, which has happened globally, which is also affecting crude, is the dollar-euro, is the strength in the dollar. One can’t overemphasize how much of the global financial market shifts are due to because of that one central parameter which is what the dollar is doing.
-Udayan Mukherjee, Managing Editor,CNBC TV18
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Positive cues from global markets and fall in crude oil prices will help the markets rally. The target for Nifty is 4600. The start should be good and markets will probably go back to the highs, which we saw early part of last week.
Our markets:
Things have happened over the weekend, which should please us and Dow was up 300-points on Friday, Asian markets are up across the board, crude fell to USD 115/bbl now it is hovering around USD 116/bbl but that will do that is a whole lot better and USD 119/bbl. So whether you look at the commodity markets or global equity markets there is every reason for us to believe that we will inch up may be towards 4,600 Nifty this morning, so we are starting off on the right note for sure.
The run-up might not end for our markets:
It should not. We went to more then 4,600 and then retraced on the Nifty and it looks like we will head back there at least for starters. The timing is good; the last two-three days the Nifty spent too much time in a range not quite sure whether it can continue with its upward journey and it needed a bit of push and we are getting that push this morning from both commodities and equities globally.
I think the timing is important and it will nudge us back up to 4,600 levels whether that would count as a breakout and momentum would be chase by traders is something we will find out during the course of the day. But the start should be good and we will probably go back to the highs which we saw early part of last week.
Asian Indices:
Asia is looking good this morning but not as good as you might have expected. The Dow is up 300-points; nowadays we don’t get those powerful 3-4% rallies in Asia. It’s turned a bit sticky but even so shouldn’t complain 1-1.5% rallies in most markets with the exception of China, which is down 2% that’s down 50-points but other markets are okay.
Does it seem like crude is going down slowly but surely?
It seems to and that is what it is doing every week and that is very good news for us but I think we still have not seen a lot of global money turned towards India. If we just look at the numbers, July 15 or 16 we had a global bottom in place and after that most markets have rallied. India is up 21% since July 16. In that period Russia is down 23% and Brazil is down about 9%. Relative performance has been so stark that India has outperformed Russia by nearly 45-46%, has outperformed Brazil by 30-32%. Even in that kind of a situation we have not seen too much money coming into India ordinarily because the trade was earlier in the year that you must go into Brazil and Russia and stay out of India and China. But the performance matrix has reversed quite dramatically since July 16, yet we have not seen too much money coming into India that is the unfortunate bit.
If global investors started thinking the commodity market trade is dead for the moment and we need to chase the commodity consumers at this point, we would have seen a lot of money coming into India but with the exception of USD 1,400 million a day we have not seen too much money coming into India. So that is what we keep tracking in the global markets hoping that now some of the money will start coming India’s way because crude has cool down very materially by more than USD 30/bbl. But sadly the money is still not coming in.
Otherwise, the cues are very good. So whether one is bullish or bearish, crude cooling down by USD 30-35/bbl from its peak materially and sentimentally does improve India’s chances from a stock market perspective and the market has performed but you are still not seeing the money come in. The US remains quite volatile but if indeed because of crude we can strike out a good rally from the recent base of close to 11,000 on the Dow and get back to more than 12,000 levels, we can certainly do with that.
Does it mean that we trade above 4,600 today and then in the near-term?
We will get to 4,600 today but in that zone of 4,600-4,650 once again there might be some headwinds coming in. In the medium-term, it looks like the Nifty is with some kind of pauses and some kind of pullbacks still moving towards that target of 4,700-4,800 at least. That seems to be a course it set out for on the July 16, it went to 4,500 once cooled down to 4,200 then made another attempt, which is now taking it to 4,600. So these are stop start kind of moves it’s not being a one-way move ever since it hit 4,500 but it seems to be drifting upwards, towards that 4,700-4,800 channel for starters at least.
A 25% rally from the lows would take it to 4,750 and these kinds of pullback rallies generally tend to be of such magnitudes, 25-30% and it seems on target for that.
-Udayan Mukherjee, Managing Editor,CNBC TV18
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Global cues are mixed. Indian markets have been strong as compared to other global markets. As of now, the factors are indeterminate. We are in a bit of a no man`s land. 4,500-4,600 levels will not hold for Nifty. The markets will go up or down depending on various factors. We are grinding as of now because of not so great cues.
Asia, and our market less reactive to moves in US markets:
We have been quite strong relative to global markets as you have said. We are not falling on days when the US is falling partly because of the crude factor. But having rallied so much and so much more than some of our Asian peers, I think we have reached a stage where people are pausing and waiting. I still think that the undercurrent or the expectation in the market is more bullish than bearish. People do believe that the Nifty will not stop here and maybe there is between 5-10% more left in this rally. That is an expectation.
However we have had a good rally and now all factors are little indeterminate. We do not know what the US markets or the global markets will do next; We do not know what crude is going to do next after this consolidation band of USD 117-120/bbl. So it is a bit of a no man’s land after a rally or taking stock of the situation, nothing wrong with that, but it cannot continue like this for very long. 4,500-4,600 range will not hold for too many days; either you will break down and go back and test 4,300-4,400 at least or you make that dash to 4,700-4,800, so one of those two. We will see a clear trend in the next two-three session’s maximum. But for the moment I think we are grinding because the cues are not tipping us in either direction.
Asian Indices:
Asia is a bit of a mixed bag; not that it’s selling off in fact some of the markets have come off their recent lows; they were down in the morning and now they have recovered somewhat. Taiwan is actually roaring 2.5% up, other markets are holding third of a percent to half a percent. Not bad but just a bit mixed.
On inflation and RBI move:
We get excited too easily. Just see two weeks of inflation plateauing and everybody says, “interest rates won’t rise any more.” But as soon as we come to next policy meeting or inflation inches up a bit which is not unlikely one will again see the same people talking about the Reserve Bank of India (RBI) tightening. The RBI has very little regard or respect for what people in the bond market think because as one would have seen in the past the bond market experts rarely get RBI policy and expectations right. The US Fed is easy to predict, the RBI is not and while the US Fed has great respect and regards for what the market thinks and expects a bit the RBI does not.
The RBI is playing is a different game here; it sees inflation plateauing at 12% and while we may take comfort from the fact that from 12% it’s not gone to 14%; 12% is unacceptably high from the RBI’s point of view and from the government’s point of view which is going into elections in a few months.
So while one may say, “we are seeing 12% every week and therefore we have learned to deal with it and therefore there is no problem.” The RBI will probably not think like that, the RBI will still think its unacceptably high and therefore it needs to keep it’s foot on the peddle and that’s the fear that come next time or maybe if inflation does inch up to 13-13.5% which is not very unlikely then will they press on the breaks once again and I do not think one should rule it out because people had call the topping out of interest rates much earlier in the year and things have panned out differently.
I am not so sure that the RBI is looking is crude everyday and saying, “great! It broke USD 120/bbl and therefore I should be taking my foot off the monetary peddle.” I doubt if the RBI thinks like that. We are still in an uncertain ground – is 12% vastly worse than 11.98%? Absolutely not; we know that we are now at 12% inflation and have been for the last few weeks. So the number in itself is not a big problem; the problem is how expectations have changed and swirled around in the last few weeks.
On the day of the monetary policy everybody was hawkish saying, “we are going to 10.5% bond yield.” That eased off because the market cooled off from there to sub-9% and then people started talking about how interest rates have peaked out.
After yesterday’s inflation number people are saying again “maybe interest rates have not peaked out.” So one will see this too and fro of opinion going around but I do not think things have materially changed from a monetary point of view, inflation point of view or an interest rate expectation point of view in the last three weeks. Things are pretty much as bad or as good whichever way one wants to look at it. So that remains a challenge for the market.
-Udayan Mukherjee, Managing Editor,CNBC TV18
