Nifty may go below 4000 levels because of negative cues from the global markets. It is a sticky environment for equities today. 3850-3800 are important supports to hold for the Nifty; let's see if the markets can hold on to it.
The global situation has been getting worse over the past few days?
It has and I do not think we need this at point in time because local news has not been good, the macro news have been disappointing, earnings have not lead us up for the last couple of days and in the midst of that market is attempting some kind of a show of resilience in trying to hold out that earlier bottom of 3,900-4,000.
Everyday we are faced with more bad news from some quarter or the other and that makes it challenging to even strike out the most modest of pullback rallies. I am afraid this morning we get pegged back once again. Let?s see whether 3,853-3,900 kind of levels hold out as support because those are very important supports to hold on to. But things become more and more challenging with every passing day out here.
Asian Indices:
It?s not a pretty picture across Asia, the Nikkei is down 2%, the Hang Seng is down more than 700-points, China is down 2.5% as well, Taiwan selling off nearly down 4% and Korea is down nearly 3% as well. So deep gashes across the Asian markets, they haven?t taken very kindly to the global developments of the last couple of days.
The problem is also that what seemed like a side issue has now become top of mind, the way global equity markets have been moving?
Yes it is and it has not been comforting because I think now people are slowly waking up to the reality that a second leg of fall in the financials is starting on the West because earlier the view was that at least the financials have bottomed out and once the market looks at better economic numbers if they come in, if the US markets could bottom out and move on but now even financials have started crumbling, many of them are broken well below their earlier lows around Bear Sterns when that incident happened.
This time around one can sense how circumspect the market has become because last time when the Bear Sterns bail out happened that sparked off a nice little rally in global markets. Almost lulling everyone to believe that the worst is over because the Fed has put a floor in place with a Bear Sterns? bail out. But this time around after that virtual bail out of Fannie and Freddie or the credit line which was thrown at them, yesterday the US markets came back from the lows of the day. The Dow futures yesterday was trading up, the US markets opened up and then got sold into because people realized that this is not the right way of looking at things.
In our context it is almost like people saying-for example a State Bank of India is going burst, the government bails it out and the markets start to rally because it is such a big thing to celebrate that the country?s largest bank was going burst and the government has bailed it out. But I think reality is now dawning that these are all terrible things, which are happening and they probably reflect a kind of malice, which maybe stock prices do not factor in even at this point in time.
This time around the reaction to the bail out has been far more circumspect than the Bear Sterns? bail out happened and that tells you something about what the market is slowly beginning to see or the reality which is slowly beginning to dawn on the market. So no, the global situation is not good at all, crude refuses to cool down below USD 144/bbl-USD 145/bbl. The volatility index (VIX) has gone up but it has not gone up to all time highs, it is still at 28 and I think we still need to go up another 30%-40% on VIX to reach its peak and who knows if that is coming sometime soon.
It is a very murky atmosphere and that is the problem right now just when you begin to think that you have factored most of the local bad news and the market is not cracking below lower level, you get another leg down from global markets which makes that resilience look fairly uncertain. So today again this morning I suspect we will get pegged back because of the global mood.
-Udayan Mukherjee, Executive Editor, TV18 |
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