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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
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Cues from the global markets are flattish. Inflation numbers will be an important cue for the markets. We are in a triggerless season right now. It will be a flattish kind of day for the markets, today.
Our markets holding up:
I don’t think yesterday would worry traders too much it was overdue, we had a fantastic 20% rally on the Nifty from the lows and after 20% rally you give up 2-3%, I don’t think traders would worry too much. The bigger question is whether there is much more upside in the Nifty and people will buy every dip on the Nifty right now and try to trade it upto may be another 5-7-8-10% or is the market running into headwinds right now and these are about the highs that we are going to see in this run.
So, that question will get answered over the next few days. We are in triggerless season right now we are pretty much moving in sync with what crude is doing, in the opposite direction that the crude is moving, so today could be a flattish kind of a day because the cues are not overwhelming. But I don’t think traders will take too heart too much what happened yesterday from the top of the day.
Asian Indices:
Asia is a bit of a mixed bag today, the Hang Seng is up but that was shut yesterday so therefore playing a bit of catch up maybe but the rest of the market which were opened yesterday are not looking particularly strong. The Nikkei is down nearly 2%, Korea is down 1.5%, China is down 0.5% it is not a very comforting Asian screen this morning.
On Nifty:
The move has been quite sharp from 3,800-4,500 but if you are a traders I think the patterns in the Nifty have been quite encouraging after a long time because we had a rally from 3,800-4,550 and then fell but we actually formed a higher bottom on that fall and went to 4,180 thereabouts and then reversed. What we have been doing for the last many months is form a series of lower bottoms and lower highs. Every time we fall, we fall and fall to a lower low, this is first time in many months that we have actually formed a higher bottom and then in yesterday’s pull back we did go up to 4,620-4,630 levels that was higher than the 4,550 levels from which the Nifty reversed, when it went back to 4,180.
One doesn’t want to read too much into it but higher top, higher bottom formation after such a long time probably just indicates a little bit more strength, which has come back to the market after a long time. The more you look at what has happened in the last three weeks of the Nifty ending with this higher top and higher bottom formation, I think one is encouraged that we are still in the midst of an intermediate uptrend, which started because typically these are the signs that the market has reassumed little bit of strength. Chartist will tell you that there is an reverted head and shoulders pattern as well, which has formed but I am no chartist but some of the technical parameters are indicating that the Nifty is in a bit more of a bullish groove now than it has been in the last 6-7 months.
The chances are that you might strike out more gains before this rally is done, at least the trading pattern seem to be indicating that but these are never conclusive, so one needs to watch what goes ahead but at least some signs of optimism have emerged for sure from a trading pattern.
Does it mean for traders they can buy and do every bottom, which is at a higher level than the previous one?
I think traders are going to do that in any case, so whether the market respects that or not will find out over a period of time. But if you ask any trader they will tell you that they are waiting for the dips now in the Nifty to go out and buy and maybe trade up to 4,800 kinds of levels. That is the trade, which is on in the market.
That may well be the case because of the patterns that we discussed. One has seen the technicals of the market changing a little bit as well, participation has come back, and volumes have improved, so it is possible that that is the way the market plays out that it dips a bit down like it did yesterday and then from a higher base, which does not go back to those 4,180 kind of levels but stops much before that, one sees the Nifty rally starting again which takes us higher than 4,600. That would be a higher top-higher bottom kind of move once again in the waves that we are forming right now.
-Udayan Mukherjee, Managing Editor,CNBC TV18
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Global market cues are sparkling. There is good cheer across Asian markets as well. Fall in crude prices have helped the markets rally. We have come back to the 4500 levels on the Nifty and now the traders expect it to touch the 4600 level ans it may happen today. This upside is typical of a bear markts rally.
Will it be only green on the screen?
For starters for sure; it looked good for the last four days; there has been quite a bit of short covering, there has been a lot of interest in midcaps and smallcaps and we are getting good cues.
Crude was always the reason which was going to spark off this rally because without crude cooling down we would never have had an India rally and now that we have lost USD 30 on the peak of crude its no surprise that we have stuck our 17-18% rally here as well.
I think its good for a bit more; don’t quite know if this is that classic bear market rally which is playing out which can take us a lot higher make everyone feel good and then start falling again. So it’s too early to say whether we are out of the woods. But this rally will always have come even in a bear market and crude being the reason for it so we should enjoy while it happens and I think people are making a bit of money on the midcaps and smallcaps too. Today the morning at least should be good.
Asian Indices:
Asia is good though the Hang Seng markets are sadly shut because that’s the one, which gives you the biggest pop after a big US rallies but the others are not doing too badly 2% in Taiwan, 2% in Korea, Japan is up 2.5% as well, China is a reluctant mover up less than 2% but average 2% rallies we should pick it up as well.
On Fed moves:
I do not think Fed’s moves are very important also I don’t think there will be much by way of it moves for the next six months. The Fed stuck in a situation where they cannot raise rates at this point in time because the economy is too weak; they cannot lower rates because inflation is not dead and it certainly remains a threat. So in this kind of an environment when one do not expect much from policy rates, the Fed has seized to be the powerful trigger which swung markets around.
It depends squarely on commodities and where global markets go from there. But the two big observations are; one, while the global markets are happy about the Fed statement that inflation will begin to ease off and they are celebrating commodities cooling down. The big question is at some point will the global markets also start asking why commodities are slowing down. And the answer to that question they may find is that growth is very weak.
So while yesterday the markets were rejoicing because the Fed said that inflation may not be such a big problem and interest rates will not go up. The sub-text of that was growth is still quite weak in the system.
Once the market stops worrying about rising inflation and rising interest rates and rising commodity prices; I think stage two will be – they get back to worrying about growth and once they find out that growth is quite weak or weak growth is the reason why commodities are correcting they may not feel very euphoric after all. So, there is a rally which is on the cards right now because global markets have been sold down quite a bit. But as we go further down the road with this rally at some point, I think the growth question will come back and that is going to be the test of global markets whether they can move on ahead of that or the rallies will be stalled at that point.
On a technical point, the other important bit is the CBOE VIX (Chicago Board Options Exchange Volatility Index) is now fallen to 21. Typically in the past we see that when the VIX approaches levels like 17-18 it tends to bottom out and then even if it stays there it tends to move back to the 30 kind of levels whenever markets starts falling again. Volatility is now edging closer to the lower end of its historic band. There might be a bit more to go; its still 21, it can certainly lose another 4-5 points. But at that point one would start worrying about complacency getting into that market and where the volatility is in for another spike again. Everything is suggesting that it’s good for a bit more maybe a bit more than a bit but after that whether we can carryon is something which time will tell.
-Udayan Mukherjee, Managing Editor,CNBC TV18
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Global cues are not so good. Markets are in the midst of an uptrend. Support from external factors still remains a question but markets are likely to go up.
A Fantastic start to the August series but is it good to go further?
That is the tricky question and a tricky part. Hopefully there is more because the market keeps coming down and then bouncing back. So the last week or ten days, I think it has shown quite a bit of inclination to move slightly higher. We closed above 4,400 on the Nifty, which was quite encouraging. So technically it seems that the screen is saying that it wants to go up right now.
Whether the external factors will support it is the big question; hopefully global markets will not fall so much or too much from here and hopefully crude will also ease off because if those factors fall into line then I think the chances of the Nifty going up to 4,500-4,600 at least seem quite bright for the moment. But it also depends on what kind of cues we get because those are the only big triggers right now. We have got most of the other triggers out of the way, earnings, policy, politics etc. So I think it will depend to a large extent on global factors but it looks like the screen is suggesting that the market wants to go up a bit more from here.
Asian Indices:
Asia is not a pretty picture; it’s not selling off but it’s weak. Kospi is the market which has sold off; down about 2.6%, Hang Seng and Nikkei are not comfortable about 1.25% down apiece and the other markets are down as well. So they have picked up the negative cues from the US and from the crude oil market.
Global situation circumspect:
Yes it is a bit volatile in the US, you do not know what to make of it but there is a Fed meeting coming up on August 5, which is tomorrow. But I do not think there will be any rate action there. Even the Fed futures market is indicating only a 7% probability of a rate hike, so those cues will come and go and that will probably not be very material.
The bigger issue is what is going on in the crude oil market and the kind of news flow that we keep hearing now from between Israel and Iran is not great. It is a fairly uncomfortable situation which is why the crude oil market, which cooled down to USD 121/bbl is seeming a bit edgy once again and that is probably the most important cue for us in the near-term in terms of sentiment because the market is trying to move up a little bit what you certainly do not need at this point is crude going to USD 135/bbl once again. That might stop the rally on its track, so one needs to monitor the geopolitics of the situation.
Having said all of that one can clearly see that there is a general feeling that India is being oversold relative to other global markets, which is why in July India was the best performing market across the region. The Sensex was up about 6.6% and that is a whole lot better than any market managed to strike out in the month of July. I think it is the first month in 2008 also that India outperformed its global peers. So maybe in the near-term there is a technical sense at least at the market, which has got terribly oversold, if global cues are terrible then India might just actually pull back a little bit more than some of the other markets because it fell much more to begin with.
I think that is important to keep in perspective because so far in the first six months of the year India has consistently underperformed most other global markets with the exception of China. If that changes around in the near-term then we could have that technical rally probably fleshing out a little bit more but for that you need generally global markets to stabilize. If all markets keep falling then India will not go up but it might fall less than the others.
On Nifty:
This morning we will pegged back 40-50 points easily because of the global cues but as one saw on Friday; Friday was an interesting day because we started the day about 200-300 points down on the Sensex and at the end of the day 300 points higher. So intra-day swing of 500-600 points probably told that market is reluctant to go down just in the near-term. We are probably still in the midst of that pullback which started from 3,800. So this morning from 4,400 can we go back to 4,350-4,380 levels; certainly possible? From there I think the market will try and stabilise a bit. I do not know whether today will be one more of those days where we start 50 points lower on the Nifty and end 50-60 points higher on the Nifty. But the market is showing reluctance to go down from here.
-Udayan Mukherjee, Managing Editor,CNBC TV18
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Markets to stay choppy; global cues unsupportive
July series is history. Inflation numbers were out. Sadly, the global cues are not great today. The Nifty has been trying to move up a little bit and has been attempting small upmoves taking some support around those 4,200-4,300 levels. After the initial dent this morning, it may move back once again though the cues are not very supportive. The markets have taken the monetary policy in its stiride.The markets will remain choppy today and attempt a bull run.
The series as well is very quiet today:
Yes, one could argue both ways but as you have seen in the last few days, the market is not falling too much so. It is probably trying to move up a little bit and if cues permit it which is global cues and crude it may actually put in a little bit of more of an upmove because every time it falls it manages to bounce back a little bit despite bad news coming. That’s typically the sign of a market, which is attempting an upmove, but nowadays the headwinds are many.
First the upmove got dented by the monetary policy and today this morning we will be rented a little bit by global cues as well but my guess is that it will be choppy still and the bulls will not give up so easily, for the sheer fact that they actually took the monetary policy in their stride and still managed to come up a bit. I think an attempt will be made to counter the early morning weakness but we should expect two-way movements today after the initial bad start.
Asian Indices:
Asia is not a pretty picture today, as you would expect after the drift down or the sell off in the US markets. So most markets are down; Nikkei is actually down 2.25%, the Hang Seng is down 2% as well, China 1.5%, Korea 1.6% all of these cues will probably peg us back 1-2% this morning as well.
On Nifty:
The point that Vetri Subramaniam was making that tight spot for a long period of time but within that tight spot, sporadic rallies which keep happening. So there are different ways of calling the same thing you can say we are in a bear market and periodically you will get bear market rallies or you can say we are in a tight spot and there will be bouts of relief from time-to-time. What started maybe two-three weeks back is a start of a process of relief; it got aborted it got interrupted then it started again.
As we go into August, people are asking that question on whether things can get a little bit better. So my guess is that today from 4,330 you probably go down and go to 4,250-4,260 kinds of levels early in the day. From there maybe once again the bears will say let me cover up, the bulls will say let me try and initiate a long position and see if the Nifty can indeed go to 4,500-4,600 levels.
I don’t think a huge rally or monstrous 30% rally from here will materialise suddenly a little bit of an upmove which was originally the case that everybody thought the Nifty was good for 4,600-4,700 but it never made it. The traders still feel that there is percentage in probably building a bit of a long on declines and these declines whenever they present themselves like they will this morning might actually get bought into. My guess is that we will see two-way movements; choppiness in the market right now, we will see down moves this morning followed by probably a bit of covering which will see the markets recover again.
If people believe that things are going to worsen both on the crude and the global front over the next few days, then at higher levels some people will open up shorts once again but I suspect that we are still in that 4,150-4,500 kind of zone which is not a small band and short-term traders will try and trade both ends of it but within that 300-350 points of the Nifty for the moment, I think you will keep tossing and turning depending on the cues that is coming from global markets and from crude.
On global cues:
We got help from global markets last couple of days, you had 400-500 rally on the Dow and that seems to have fizzled out after the economic numbers. The thing is that one cannot rely on what is going to come from US because things are so bad out there that at best we will get those relief rallies and relief rallies can be significant in magnitude as well, the Dow went to sub-11,000. If there is a string of good days and good data points suddenly we will see the Dow back to 12,000 then we will start getting hopeful and once again something bad will happen. Some Fannie and Freddie mess will come up once again and then we will get pegged back to 11,000. We are in very volatile ground out there for the global markets.
-Udayan Mukherjee, Managing Editor,CNBC TV18
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It's the series closing day today, it's last day of earnings season for this quarter. Crude has reared its ugly head again. Markets have lost 20% in the June series.
But after today, one'll start struggling for any major triggers.
Crude is bad news and might impact sentiment, so will inflation later in the day.
A Tumultuous series:
Yes, it would have been tumultuous given what happened in June we lost 20% in the June series so either way there would have been volatility and we got our share of it in the July series for sure.
Earnings season also comes to an end today so after today you will start struggling for any kind of major triggers because politics played out in July, earnings played out in July and policy played out in July, policy played at as well, so pretty much left to crude for the month of August, so an interesting drawdown to the July series. We have two volatile days as well to contend with day before and yesterday when one really bad down day and then a good up day yesterday.
I don’t know what to make of the market is still in a bit of a trading range but crude is bad news and might tend back sentiment as could the inflation number later in the day. So all put together a bit perky a bit volatile, can’t trade the day it’s going to be risky because it’s a settlement day as well but we are in 4,100-4,500 kind of range for the Nifty and bang in the middle of it.
Asian Indices:
Asia is a bit of a mixed bag; its not the kind of follow up that one expects to see after a good 200 point rally in the US perhaps because of crude. Nikkei is down quite a bit, China is down 2%; Hang Seng virtually flat so is Korea and so is the Straits Times index ,so no luck across Asia. Some down, some up but broadly flat.
Global set up:
Everybody is ignoring the US for the moment and I think correctly so because the US is in a manic state, it is extremely sensitive to every incremental data which is coming in so one day, crude will go up to USD 2/bbl and it will fall a 200 points, the next day some bank will declare a slightly better set of numbers and the markets will rejoice and go up about 200 points. It’s that unsettled zone right now and therefore other markets are not picking up their cues directly. Yesterday there was good data of non-farm jobs data and the market reacted very heavily and ignored crude. Who knows today when they come back and see crude at these levels of USD 126/bbl, what the reaction would be.
There is an undercurrent of volatility in the US which is not subsiding which cannot be very good news, but for our markets, people are tracking crude more closely than the current volatility right now and even crude remains extremely volatile. Last few days haven’t belonged to the crude bulls but there has been a surprising rally overnight of about USD 4/bbl to USD 5/bbl, so the nerves might be a little edgy as we go into trade.
The big hope for the market is crude is going to USD 100/bbl and so the Indian markets should be at a slightly higher level. So you don’t know what to make of these global cues, they are all too volatile to predict, we are once again coming up to that early morning gap up, gap down kind of a syndrome for the global markets depending on both the US and the crude oil market. I think its straight for the day and generally don’t trust the global cues because they change around all too suddenly and they are too fickle nowadays.
On Nifty:
I think the more you see the Nifty; its interesting pattern which formed because the bounce back was very sharp to 4,500 maybe too sharp and therefore it had to give up some ground and the monetary policy provided or induced the trigger which brought it back to about 4,200 levels. But the more you talk to traders and the more you look at the Nifty and what its done for the last few days; its almost like somebody saying, “I had an intermediate pullback in mind maybe I overshot it and therefore have to run back because I have to gather some breadth but the pullback which has started from 3,800 is probably incomplete. So maybe I did not quite complete at 4,500 and therefore at every lower level there is a bit of a support which is coming in.” So it’s an interesting kind of pattern; it does not look like the typical boom bust kind of pattern on the Nifty 3,800-4,500-3,800. It looks like its overshot and has cool back and much before 3,800-4,000 levels came in traders’ flocked back saying, “So what if we dashed up early to 4,500 there is juice in this pullback, it’s not completely done and so I need to long here and try it plays back to 4,500-4,600-4,700 whatever the initial target for the Nifty was.” That I think is what traders are going with at this point in time and that’s the sense you increasingly get from the Nifty patterns.
-Udayan Mukherjee, Managing Editor,CNBC TV18
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As we discussed ad nauseam yesterday; the kind of rate hike that we are seeing in the system and the feeling that we are not done with interest rate spikes just yet, at least in the next three to six months you are likely to see more of rate tightening that is creating a lot of problems for us even going forward in terms of growth. It may cool growth and hurt earnings more than people expect. This is a market which is still trading close to 14 times next year’s earnings or current year’s earnings that’s not cheap. If interest rates go up more then there is very possibility that the PE multiple also gets crunched lower than the current 14 times which is not the cheapest you will find in the world today.
I am quite apprehensive about the medium-term with the kind of interest rates scenario that we are seeing in the market right now and I think trading rallies not withstanding and short covering rallies not withstanding, it would be quite a surprise for me if the markets don’t gravitate lower unless that one joker in the pack crude surprises by cooling down to USD 80-90 which is something which you cannot rule out and if that happened certainly that changes equations. So with that proviso, I think things are quite sticky.
The undercurrent though yesterday was the fear that the market might be heading back to those 3,800 levels, how does life look for even Nifty in terms of trade?
It may well be headed there but it is not easy to project it in one line that is the problem with trading. Who is to say that from the current level the Nifty does not give you a jerk back to 4,300-4,400 even if it has to go down to 4,000 and below that eventually. So these are difficult to call and most traders do not trade with more than 100-150 points’ Nifty stops.
One could get cut out on a short covering rally quite easily even if your view eventually turns out to be correct and the market does gravitate lower. So trading is one thing eventually the environment for equities and where the markets could be headed could be another call altogether. We settled at about 4,180 level yesterday on the Nifty, we will probably start closer to 4,240-4,250 this morning, might go a little higher as well, tomorrow there is F&O settlement so one does not know if there is a little bit of covering to do for some of the weaker hands. But given what has happened yesterday, unless there is a big cool down in crude and I keep repeating that because that is one factor which can make you change your outlook on the market quite dramatically.
The market is weak right now even today’s morning’s rally not withstanding. However, if we have a scenario in the next few days that crude falls to USD 100/bbl very quickly then I do not think that the Nifty is going to go and break 4,000 on the way down. In fact, the chances of it trying to claw back to 4,500-4,600 and maybe even higher certainly increases, if crude go down by that much. That is the only thing one needs to watch for a near-term sentiment or a trend change.
Generally speaking the market is betraying weakness and I think there is a lot of fundamental reason to be fairly cautious about the market even from these levels though there could be a near-term rally for a day or half a day or couple of days reading upto the settlement starting this morning.
-Udayan Mukherjee, Managing Editor,CNBC TV18
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The global cues are better today. Maybe that will lift the stock prices and mood a little bit after yesterday's depression. Though the bad taste will linger for a while.
There could be some amount of a pullback led by global cues. But markets will need a long time to get used to the bitter taste left by the higher interest rates yesterday. The meduim-term sustainability is still quite challenging.
Markets post monetary policy:
There might be a bit of a rally today because the market has fallen quite a bit already 300-350 points from its recent high, so there could be some amount of a pullback led by global factors maybe some short covering ahead of the expiry tomorrow. All of that, those are possibilities but the news flow just got worse yesterday and the market will need a lot of time to deal with the kind of bitter medicine that we are getting on the interest rate front.
It cannot be wished away, things will slowdown and probably more than we think out here or price in right now. In the medium-term, I think there are still a lot of problems unless crude comes off in a big hurry. In the short-term just starting this morning you will almost certainly get a bounce, which takes us maybe 60-80 points higher on the Nifty but medium-term sustainability is still quite challenging.
Asian Indices:
Asia is responding to the US rally overnight. Some markets are a little subdued, not quite picked it up like Korea, Singapore, China they haven’t quite rallied with gusto but the Hang Seng which is fairly high beta is up 2% and the Nikkei is up 1.3%. So good rallies across Asia much better than what they did yesterday.
On Global cues:
Nowadays when the US market rallies, the Asian markets don’t pick it up with the same gusto because there is a general feeling that the US market rallies are not to be trusted particularly the rallies which are sparked off or led by the financials out there because financials rally 10% one day then they fall 15% the next day. These are manic kind of bear market rallies, which are panning out in the US, and there is no great conviction in what you are seeing out there also the volatility is huge so between days, you are moving 250 up one day, 250 down the next day barring the small trader reaction which comes in first thing in the morning the rest of the day other markets pretty much want to do their own thing.
The only positive, which is coming through from the global space, is indeed crude not just because it’s at USD 122/bbl but the pattern is looking like crude has weakened. Every upmove is facing a lot of resistance. It goes down to USD 123/bbl pulls upto USD 125/bbl-126/bbl goes back to USD 122/bbl, so the pattern of the last few times that crude has tried to put its head up for a pullback rally after the cool down they have not materialized very successfully. These kind of formations of lower tops and lower bottoms which is happening in crude right now consistently over the last few days is a pattern which should encourage equity market participants for sure and that centrally remains the big hope because everything else is not looking very rosy; global equities remain weak, the US is mired with problems you have seen the Case-Shiller Index yesterday plummeting 15.8% that is not a harbinger of a great economic news or lot of economic comfort which is to follow. I don’t think you expect much by way of flows as well.
The only silver linings strangely right now, is the possibility of crude cooling down and if that happens it can save us the blushes but otherwise we are still in a very vicious equity environment locally and globally.
Monetary Policy- Is it the biggest problem market will have to face?
It is certainly one of the biggest problems; I do not know if it is the biggest problem because nowadays problems come from many quarters and surprise you but it’s certainly is a big problem. The point is generally analysts are quite behind the curve and fairly clueless about where policy rates could be headed. So one shouldn’t take opinion on board right now and trying to predict where rates might eventually go because the Reserve Bank of India will do what it has to do.
There is a disturbing note from JP Morgan this morning suggesting that the bond yield by December will go up to 11% on the benchmark which is now hovering just below 9.5%. If they have got it right then you have got far bigger problems in store for the equity markets here.
-Udayan Mukherjee, Managing Editor,CNBC TV18
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It's a start of a really important week for our markets. There are lot of triggers staked up for the markets this week, monetary policy and a very important one tomorrow is the F&O settlement for the month of July on Thursday. We have got a week packed with earnings from a lot of critical sectors.
The markets will try and react to the unfortunate blasts over the weekend. So, there is so much to price in as we head into the next five days of trade.
May not be unfair to almost call it a make or break run for the next five days?
It is particularly because of what happened last week, when we saw the massive pullback and then the last part of the week was not that good and so we are in the grey zone right now, no man?s land where every trader is trying to figure out whether the market is trying to put 3,800 as a base and has succeeded in moving up into an intermediate upmove but the reversals of the last couple of days coupled with all that has happened probably the questions are beginning to be asked on whether that rally has not fizzle out yet.
The answers are not out yet but I think over the next couple of days also depending on how the news flow pans out one will get a sense whether this intermediate uptrend can last a bit longer than people believe or has the first signs of tiring out has happened on Friday and that will continue as we go forward.
It is difficult to game, this is a big week, there are lots of triggers and hopefully the incidence of last the weekend will not spill over to this week as well and that is the lingering fear on sentiment this morning as well.
Asian Indices:
No great cues from the US markets and Asia is pretty mixed and quiet this morning. China is the one which has got up about 1.5%, other markets are just either up 0.25% or down 0.25% no great cues coming in from Asia this morning for us.
Impact of Ahmedabad and Bangalore blasts on the markets:
Unfortunate that those incidences are, I think the material impact on the markets might not be too much of course those events are a tragedy in themselves but if one looks at the narrow perspective of the market; I do not think there will be any big reaction because the markets have changed over the years. Maybe four-five years back if one had something like a blast happening almost inevitably there would be a sharp knee jerk reaction which would take the markets down. Nowadays, I find the markets are far more resilient to that. I think people remember the recent histories of the last couple of incidents which were far bigger in magnitude than what has happened over the weekend and the markets dealt with them fairly well.
I think the markets ability to absorb news which does not directly affect financial markets and companies directly has evolved over the year and now we are in a far better situation. So those events are very sad and unfortunate but will they peg the market back significantly this morning? I doubt it. The only lingering fear is it?s happened in two major cities and the market would fear if something else happens or something more were to happen then it might affect sentiment quite a bit because its one thing to say okay those are isolated incidences which happened over the weekend, they are not indicative of much more to come over the next few days and as long as that is the belief in the market, I do not think there would be any kind of major price reaction.
It could happen for a minute or two but it?s unlikely that despite sentiment being a bit edgy because of it and will get edgier if there are more such incidence heaven forbid that we do not see such more incidents in the coming week. But if they do not happen I suspect the market will be able to move on; at best a bit of edgy sentiment but no more than that.
I have heard people saying gap-down etc on Monday morning but I would be surprised if that happens.
How do things shape up for the index?
It is an interesting juncture right now and there are too many issues in the next few days, which can swing or make or break the Nifty?s movement because it has made that big dash from 3,800 to more than 4,500 and then has recoiled to about 4,300.
-Udayan Mukherjee, Managing Editor,CNBC TV18
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It's the last trading day of what has been truly an eventful week for the market and so much has happened in the last week. The vote of confidence went through, there was a big rally yesterday, a bit of a cool off, inflation numbers have come in as well which don’t look so menacing. However, today we do not have great cues from the global markets.
So can we finish off a week which has been very good and kind for stock prices and has brought us to the brink of 15,000 once again?
Markets may not look good today because of global cues.
On markets today:
The morning will probably not be great because of the global cues, but this much of a retracement was expected because the rally was very sharp; in one shot we went up from 4,100 to 4,500 over just a few days. So maybe the market gives back a bit as it did yesterday; a bit more is fine and acceptable. Even if we close the day or lose 50-60-80 points today, I do not think traders will lose heart on the uptrend just yet. But if one sees an alarming cut in the morning and more importantly, if those cuts don’t get filled up by the end of the trading day then traders will begin to worry because the global cues are once again not looking good.
But overall the markets seem fine; it has started an uptrend and it's doing all the right things having gone up very sharply, it's pausing and giving up some of those gains - that’s all very fine. So as long as the losses are limited today we will still be okay for next week.
On Asia Indices:
Asia is a bit soft, as you would expect after the sell off in the global markets or the US markets. Taiwan is down more than 2%, Straits Times almost 2%, Korea is about 1.7%, China is down 1%, Hang Seng has recovered some of its losses now around 1.5% and so is the Nikkei. So cuts between 1% and 2% across Asia this morning.
On Global markets:
The global market seems very volatile that is the problem. It is not settling down and the kind of volatility that we are seeing-we see very smart short covering rallies punctuated by fairly sharp sell offs like yesterday’s. So things are not quite easy out there though there is an attempt to bounce off the bottom that they put in place or seem to put in place a couple of days back.
Equally, the economic data which is coming through from the US is not very reassuring again; housing data continues to be extremely poor, financials extremely edgy they bounced back and then they sold off once again, big experts like Bill Gross are talking about more pain in the financial sector out there.
So I think sentiment is quite shaky and if the market indeed is to climb higher levels from here, I think it would need help not just from the crude oil market but it would need some reassurance from global equities as well. I do not think if global equities do collapse even if crude is cooling down, I doubt whether Nifty can hold out very much further from here. So this morning we will get pegged back but that is not the end of this run at least for the moment it seems like.
I think one needs to see a little bit more stability, the Volatility Index (VIX) is just running all over the place; one day it cools down 10%, the other day it bounces off 10% that is a very unsettling kind of an environment for us to outperform in.
-Udayan Mukherjee, Managing Editor,CNBC TV18
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It's a big morning for markets today. There could be a rally today and every indication suggests that there will be a gap-up in the markets. The global equities look good, crude will help the margins and politics may also prove good for the markets.
Taking into account all the indications, I think few days will belong to bulls.
On Markets today:
Taking today’s gap up into account, it would have been a fairly meaningful pop from the bottom from 3,800. If we do get to 4,400-4,500 today, we are talking more than 15% that is a meaningful rally. But after that I don’t know whether people will chose to take profits because a lot of traders would have build positions and you can see that the Nifty futures is at a premium. So long positions have been built ahead of that event and people might do a little bit of profit taking but the mood seems to have changed a little bit, not just because of politics but because of global markets, crude etc. Generally, people are trying to sniff out a long trade out here despite today’s gap-up. So it could be a gap-up and then relent a little bit, give up some of its profits and then rally once again, as the long traders now getting to the act. So the next few days unless there is some untoward incident in crude should belong to the bulls starting off this morning, it might happen with a little bit of dip down after the initial gap. But the bears will find it tough over the next few days at least.
On Asian Indices:
Asia is also helping us this morning so it’s not just the UPA victory pushing as along nice rallies across Asia. Hang Seng is up 2%, Taiwan is up 3%, Korea is up nearly 2% and even Japan is up 1.25%. So for the last few days Asian markets and global markets have been helping us.
More reforms ahead now?
One should expect what the Finance Minister told us he and I hope that can push through some of these reforms, which have been long pending. I do not know about new ones like disinvestment etc which people are expecting because it seems like there is not too much time to push through because we will get to the state elections very shortly. But not that they are mutually exclusive but even if they can do pass that insurance 49% and the banking reforms, banks could rally quite significantly if voting rights do get recognized.
So it is possible that they do banks and insurance because that is not very difficult to implement from a government perspective. The rest we will have to see, keep fingers crossed because there has been a lot of talk about swift disinvestment of many companies, which will breach the fiscal deficit that I think we will need to wait and watch because what has not happened in more than four years to expect in the next four months might be a bit wishful. But even if a little bit happens I think the markets will take that quite positively and that is the hope since both the Prime Minister (PM) and the Finance Minister (FM) are talking about reforms as soon as the vote is done maybe they will manage to do something and if they do I think it might be a sentiment lifter for the markets.
I do not think the case for a bull market or a bear market changes because insurance goes up from 26% to 49%. At the best it will send out a good signal to global investors who seem to be shunning us today but banking is quite material and if this disinvestment happens it is more than material. So we live in hope, some things may happen, I do not know about all of it.
Where does Nifty go from here?
A: I think this morning we will start with about 4,400 or maybe a bit higher than that. So from the base of 3,800-4,400 we would have already done 15% that’s quite a material rally. We are assuming about 4-5% rally this morning as well. So the mood has got lifted so the question is whether you do see some profit taking or the long traders come back and soak up any small dip in the market and also how much of short covering is still left in the system because some people might have actually not covered up their shorts given that the vote could have swung either way.
So maybe marginal short covering is also left which could propel the index a bit higher. So we will start gap up. After we go to 4,445 can the market come back to 4,300-4,250 kind of levels which would be a profit taking dip and then resume its upward journey; it’s entirely possible. But for the moment it looks like the bulls have the edge.
-Udayan Mukherjee, Managing Editor,CNBC TV18