So the more important move yesterday - aside of the CRR move perhaps was the inducement or a little bit of a stick that the Finance Minister showed to the public sector banks to go ahead and start lending. It is like taking the horse to the water but can’t make him drink; I suspect the situation is quite like that now. I hope that this will ease up lending a little bit it will cool the call market to a certain extent may lead to a little bit of a move in the yield and perhaps in public sector banking stocks. But is it the medicine for all the yields in the market today? - I don’t think at all.



The timing for this move is poor because we have had a massive global sell-off and we will fall in line with it negating any possible impact of this cash reserve ratio (CRR) move whatever little would have happened but even in the medium-term, I doubt whether this would be terribly material in swinging around sentiment for the stock market.

-Udayan Mukherjee, Managing Editor,CNBC TV18...

Traders will do their little bit of short covering etc after the initial gap down of a couple of 100-points and that may well be the right thing to do but this market is not showing any signs of the pain getting over. Sure one can keep on talking about value having emerged but that value people were talking about at 3,800 as well, now we are at 3,100. I suspect that we are not through with price erosion; I don’t know what levels we will reach but just take your minds off Nifty levels and Sensex levels and see what kind of earnings, we may land up with in FY10. I am getting that sneaking suspicions that you are going to see single digit earnings growth in 2010, so all that 15-16% earnings growth is coming down to 10-12%. I won’t be surprised if we land up with 7-8% kind of earnings growth in 2010 and if indeed Sensex earnings are going to grow at 7-8% in 2010, then what stops this market from going down to a multiple of something close to a 9 times.



We have spoken about this before the possibility of us heading to somewhere close to 8,500 levels that may well happen. I don’t know what that coincides with for the Nifty but sub 3,000 for sure. I am not suggesting that will happen this morning or in this week or anything like that, it may or it may not but we may go to 3,000-2,900 and then give a pullback to 3,300-3,400 and then in the next leg down, we may even go down even lower.



One is always surprised by the levels which the bear market eventually finds a bottom in. Most people do not predict it accurately and people keep buying at lower and lower level, which seem extremely low compared to where the prices have fallen from but prices inevitably move even lower than that. I am not saying that these are targets but I won’t be surprised, if we went to 8,500 kind of levels on the Sensex and may be even 2,500-2,600 kind of levels on the Nifty. I know this sounds very scary but bear markets are scary beasts, one should not be presumptuous about levels at all while dipping your stick and starting to buy.

The only thing that’s trending it seems the outflows this morning; it comes with some riders for the whole community as well from the SEBI(Securities and Exchange Board of India)?



Yes it does. Yesterday’s provisional figure or day before provisional figure always looked a bit suspect the way the markets moved and that’s been corrected; it was a sell figure finally. Yesterday more than USD 200 million went out and what Sebi is trying to do is to get some more information about shorts which are done against P-Notes.



The problem there is that that may well ease off a bit because Sebi seems to be leaning on it; its not banning it and that’s the right thing in my eyes to do. Not to go about doing silly things like banning, shorting etc which its Western peers has resorted to, to disastrous effect. I think Sebi is doing the right thing despite calamitous falls in the markets not to go down the route of just adopting market distorting measures.



This one, I do not think they will ban or they will probably just frown on it a bit suggesting to the FIIs (Foreign Institutional Investor) that –‘We are not very happy with this in this market condition ‘and therefore FIIs may simply stop borrowing stock from P-Notes shorting against it because the P-Note window has opened once against few days back and therefore FIIs can short directly with effortless ease. So maybe that borrowed window will stop and direct shorting will start but I would be surprised if this turns out to be the major short covering trigger which people are expecting – far from it.



On CRR cut:



It’s a good move because the system needs liquidity and the Reserve Bank of India (RBI) is doing its best to throw some money into the system while the problem is not of the magnitude of the credit market in the west for sure, but even so now there is a fear psychosis in the lending market. So like the Fed cut rates but it made no difference to the credit market out there- I am not saying it’s a that dramatic a situation in our lending market or in our credit market but I suspect there is an element of fear psychosis which is there in the system right now, which is preventing people from lending out.


-Udayan Mukherjee, Managing Editor,CNBC TV18...

The day is set for another disastrous morning. What looked like a ray of hope on the back of various policy measures across the globe it now appears that all the good work has been undone.



US markets have fallen by 8-9% and Asian markets are down by 5-10%. For starters, we could see a 200-point fall for the Nifty.



Just when we thought: we have had a capitulation and the bottom has been hit, we figure out that that no longer is the case.



The Volatility Index (VIX) is close to a historic high of about 70. I just hope that this does not turn out to be the mother of all bear markets.



Bear markets are scary beasts and so one should not be presumptuous about levels.



The timing for CRR cut is poor because we have had a massive global sell-off and we will fall in line with it negating any possible impact of this cash reserve ratio (CRR) move whatever little would have happened but even in the medium-term, I doubt whether this would be terribly material in swinging around sentiment for the stock market.



Maybe we smelt it coming but it has just been such an ugly swirl overnight for global markets?



Yes and this comes on a backdrop of hope that we have probably put a little bit of panic behind us last week and look where we have landed up. At the end of last week’s trade, there was a growing feeling that okay we have had a complete capitulation and now that is an intermediate bottom from which the markets might start moving up in the near-term. But we have 8,500 on the Dow again, S&P is back to 900; it is a complete disaster.



The VIX is now up to almost 70, a historic high by far and I think it has doubled over the previous high, which it had hit. So things are in a complete panic state out there. One can talk about retail sales data in the US, but that I think is just an excuse for a market, which is just seeking bad news to latch onto to go down anyway.


It seems that nobody quite has a finger on what’s happening like you said every phase of this weakness seems like capitulation is done with and there is another?



That’s the worrying part whether this is pointing to something which is far more ominous than people believe at this point in time. The kind of sell offs that we are seeing – a while back I heard somebody say, “Mother of all bull markets is going to come soon.” I hope this is not the mother of all bear markets that we are staring at.



I think what you will see over the next few days and weeks and if you are not seeing it already is people generally resigning themselves to a kind of bear market which they did not expect earlier and I suspect that you will probably see a expectations of the time it takes to recover from this also getting pushed back somewhat and all those rosy forecasts of come January will be up and running from the blocks. I doubt we will linger on very much longer.



So we are in the midst of something bad here globally and locally; best is not to wear blinkers and use hope as your key strategy. This is looking like vicious bear market. We are down 50% from peak already and it doesn’t look like we are anywhere close to being done with this, we probably already staring at one of the worst bear markets that we have seen in our history.



Asian Indices:



Asia is a terrible picture this morning; the Nikkei is down nearly 10%, Hang Seng is down 7.5%, China is not doing too badly in the context of what’s going on, Korea is down 7% as well and the SGX (Singapore Exchange Ltd) Nifty is also suggesting a cut of between 6-7% for starters so its not going to be good this morning.



The market doesn’t seem to be in a mood to indicate that it is stabilizing or stopping any way- our own market?



Far from it, as we have been saying you can clutch on to the crutch of any level that you like but those don’t work. They work in trending markets but they don’t work in markets like these, which are in panic mode. One can hear many levels, from 3,800 downwards you have been hearing many levels at every 100-point on the Nifty, none have held. So 3,200 this morning will get broken as well at least intra-day, so we will probably go down to somewhere close to 3,100-3,150. So you have violated the earlier intra-day low and have gone one notch lower than that in any case. So technically you are still forming lower lows in every down wave and that is not comforting.



-Udayan Mukherjee, Managing Editor,CNBC TV18...

FIIs bought quite a bit yesterday cash and futures markets but Rs 800 crore of cash market buying, some Rs 1,600-1,700 crore of futures market buying did not move prices very much yesterday. Nothing is helping; the put call ratio remains stubbornly stuck at 0.75 indicating that the options market is probably still extremely cautious about the way forward. You haven’t seen a big snapback in the put call ratio to one plus levels despite the rally of the last few days, stock futures continued to shed open interest and at higher levels people are still merrily writing away the calls at 3,700.

The mood is still very circumspect that’s what the internal seem to be indicating as well but noting can move stock prices beyond a point it seems nowadays. On bad days when FIIs sells stock prices go down, on good days when FIIs buys stock prices don’t hold their gains so tough going.

We were talking yesterday about the possibility of the market marking out a new range for itself as well; does that seem to be happening?



It could. You just had a panic bottom last week, we plunged to 3,200 kind of levels and from there you come back to about 3,500. This morning you will probably get knocked back 50-70 points on the index, get between that 3,400 and 3,500 zone. It is likely and conceivable that in the near-term till any kind of fresh panic ensue you, we will probably try and hold out 3,300-3,700 kind of zone. 400 points toss around in that. On good days get closer to 3,700 and on bad days get closer to 3,300. This could hold for a bit because that is the pattern this market has been forming. It plunges to a new low and then consolidates for a few weeks within a 400-500 kind of range and then something bad happens once again and then you go and form a new range on the way down.



I do not know whether that familiar pattern will play out this time around but it seems to be what the market or the traders are playing for a 3,300-3,700 kind of zone just for the near-term. But those visions of galloping pass 3,800 well into more than 4,000, those expectations - if they had been raised early part of this week - would have been watered down yesterday.


There are rumblings again of more policy action, SLR (statutory liquidity ratio), direct rate action. Can we expect something by way of policy moves this week?



I suspect so, because all the policy makers have been talking and that is the right thing to do in this kind of situation. Yesterday we saw that the banks or the mutual fund liquidity window did not have many takers. This morning the call rates have gone back to about 10%, so things are not quite easy. They have tried one bit; call was 20%, it has fallen to single digit but 10% is not comfortable. I suspect you will have to throw more money in now and may well happen today.



That is the thing, which is important for traders. We are not discussing macro right now; we have spoken about that last couple of days what is going to come, CRR (cash reserve ratio), SLR, repo all in the realm of likelihood. But if you are thinking of going short now, you have to keep that policy perspective in mind because anytime something by way of policy help might come and could lead to a sharp intra-day spike. It may not be a very durable one but you will get cut out if you are short. So just keep that thing at the back of your mind if you are trying to hammer the market down or take a negative view based on global events because suddenly in the middle of the day you will see 100 bps gone on the CRR and that will lead to 100 points spike in the Nifty cleaning you out.



In this environment you are likely to get constant doses of policy impetus whether they will work in the medium-term or not, it is a different debate. But in the near-term, it might hurt your short position and so one needs to be a bit careful about what you are doing here.

-Udayan Mukherjee, Managing Editor,CNBC TV18...

In hindsight, the market’s behaviour yesterday was very clever for it had the sense that developments in the US would fizzle out. So we resign ourselves to a subdued opening on the back of negative global markets.



Everyday, the move in India is preceded by US developments. While on Tuesday, there was exuberance in the US about the bailout package, it got tempered late in the evening, even as things may bounce back in the US after a day’s pause.



So early morning, we get back a couple of percentages. More importantly, we do not reach the 3,700-3,800 target that traders were working with.


Our markets this morning:



It’s uncanny the way our markets participants have sussed out the US market action these last few days; it’s been really uncanny. Everyday the move in India precedes the correct move in the US and yesterday we probably saw what was coming late tonight despite the package there was a lot of exuberance early evening our time but then it fizzled out by the end of it. So more and more economic forecasters are now talking about a big recession in the US and across the world that I think is probably leading to far worse sentiment despite these kinds of stimulus packages which are coming in.



So things are not great maybe we bounce back again in the West after a day’s pause but its not going to be easy, its not going to be a one way kind of a rally there across the world and that’s the sense everybody is getting. We get pegged back couple of percentage points this morning. More importantly we get further away from that 3,800 target which traders were working with for the Nifty.

Asian Indices:



Asia is not exactly selling off but things are soft across Asia; cuts ranging from 1% to3%. Korea and Hong Kong are not looking particularly good. All markets are down but some of them are down about 1%-1.25%, the SGX (Singapore Exchange Ltd) is also suggesting a cut or magnitude for us about a couple of percentage points.



The moves are coming in but does it seem like that pressure cooker situation is getting resolved?



The financial panic may have stemmed a little bit over the last couple of days because London inter-bank offered rate (LIBOR) has eased off a bit but then its flattened off. We would ideally like to see some more of a fall in the LIBOR to get a sense that things have indeed eased off in the credit market out there. The market celebrated for one day and then very quickly moved to focusing on earnings and macro that’s typically the sign of a bear market. You get those big rallies because of intermediate relief measures, which come in but almost immediately after that the market starts sulking about other things, which are wrong in the system.



So yesterday in the US, they were talking about PepsiCo where earnings were not good, they were talking about the downgrade in Google, they were talking about the Posco demand warning which came in and none of that is good news for the markets going forward. The kind of demand destruction that Posco was talking about, so the market chose to focus on that saying, “Earnings are going to be pretty bad for the next few quarters so what do we celebrating about this liquidity injection. Once this is done and the dust settles on the financial panic, we will have another set of worries which is the macro and the earnings worries to deal with and therefore, maybe we should be a bit guarded about how much more we pushed the envelope just now.”


11% rally, a good start and that fizzled out yesterday. The other bad things which are coming around which is the kind of UK housing data which is coming in is probably telling you that the problem there fundamentally is very far from over. Yesterday they took profits out there in the US and might just be the right thing to do. Maybe in the foreseeable future, you will see a slightly healthier range holding out in the global markets maybe not the kind of panic that we saw last week because they are trying to address the financial panic situation for the moment, but going forward is going to be a long trudge ahead and every data point that’s coming through from the west is just highlighting and driving that fear into investors.



We just seemed to be muddling around a bit as well yesterday?



We did but we got some money from the FIIs (Foreign Institutional Investor). Curiously after just one day rally or one and a half day rally the domestic institutions take their hand off saying, “okay we got the bounce but we are not going to buy now because we got 300 points higher.” and that’s been the consistent pattern. On panic days you get a little bit of buying from the domestic institutions but day two, day three they step out of the way once again.



-Udayan Mukherjee, Managing Editor,CNBC TV18...

But the bigger question that you have to ask yourself right now is - Whether this part of the bear market, which was precipitated by a pure credit market crisis, is that on its last leg? The answer to that may well be yes. That does not mean that the global bear market is over by any stretch. That simply means that one part of the problem is probably getting resolved or on its way to getting resolved over a period of time with the kind of regulatory action that you are seeing right now.



The exact analogy for me is India and the crude problem. Crude was the biggest problem and that had crippled us down to 12,500 Sensex. That point looked like the main part of the bear market and now crude is down to USD 80/bbl but we are still in the bear market and we are at a lower low. So a different reason has come to the fore and has led us, we are continuing on the path of the bear market but one of the problems has got resolved, which is crude. I think the exact analogy of this is a global market where the credit market crisis probably is on its last leg. That will get solved; will provide a nice little fillip like you saw from 12,500 to 15,500, you had that rally. Then the other big shoe will drop, which is that basic economic conditions, earnings etc will all start to worsen.



So the eye will then move off from the credit market crisis and probably will focus on the real problems of the world, which probably will happen in 2009. So I do not think the global bear market in equities is over. We maybe in for a powerful bounce because one big part of the problem is probably close to resolution. I could be terribly wrong because I am no expert on these things but this probably to me is the likely road ahead which we will see.

For us in specific though, would one worry about a slightly synthetic nature to the bounce because it doesn’t seem to be bolstered by money?

No it’s not but the Nifty fell quite sharply on its way down it took support at 3,800 only for a bit and then alarmingly it fell 600-points moved to 3,200. Now in that bounce back, I think the first target this morning will be that 3,600-3,650 zone, once you clear that 3,650 kind of zone, which a lot of traders will probably look at very closely, you will eye the next big breakdown level which was 3,800 and at that point there could be some serious resistance.

The thing that you play for now is a bit more support from global markets during the course of the week. If the Dow rallies 5-6% more tomorrow because of the specific measures, which might come in as expected tonight then you could see a little bit more of a pop back and maybe the Nifty does make it to 3,800 and then questions will be asked once again.

The problem is that even if it did go to 3,800 etc. people will be extremely reluctant this time around to say that we are out of the woods because last time around that view was a dangerous view to take. The way to look at the index now is that you have had a major fall, you have gone to 10,000 Sensex, which is psychologically important level and from there you would have expected from such oversold levels a bounce. The bigger point is the rebound from 10,000 to 12,5000-13,000-14,000 wherever we have to go, and is there another leg down coming because of earnings, GDP, economic numbers etc. which crunches as below that 10,000 level. I don’t know the answer to that but I won’t be complacent in forming a view at this point.



What does the Nifty play for then in the bounce back?



For the moment, as I said 3,650 for today may be if things remain good 3,800 tomorrow. The problem is that there is no weight of money as you are seeing behind us. Yesterday was such a good day for our markets 7% up you would have thought Foreign Institutional Investors (FIIs) bought a lot; FIIs actually sold a Rs 1,000 crore in the cash market.



So yesterday’s rally was such a big short covering rally that you tend to be a little worried about on that score because the rally left the Nifty at a 50-point premium on the futures. We saw some Rs 1,700 crore of Nifty futures buying, so it was just a big short covering rally nothing wrong with that but you would have wanted to see Rs 1,500 crore of cash market buying from FIIs as well, that would have given it a little bit more of an air of stability.



May be there is a bit more short covering left but we are still not getting the force of money. Option traders remain skittish while they are happy writing 3,100-3,300 Puts, they are also not reluctant to write 3,600-3,700 kind of Calls. So they essentially believe that the market is still range bound with the previous base as the top.

-Udayan Mukherjee, Managing Editor,CNBC TV18...

This is turning out to be a much better week after last week’s 15% fall on the markets. Yesterday, we were up 7% or 800 points on the Sensex and this morning, the Dow Jones has had an 11% rally.



Asian markets have picked up from global cues and we are on course for a gap up opening. Things are improving and there is no reason why our markets won’t respond.



So there will be a positive opening, and I see no reason why we should not hold on to some of the gains till close.



The global intervention has helped and there will be a technical pop. What remains to be seen is after we see a rise in morning, how much more could the markets go up — they would sure see some resistance at higher levels and the markets will need to answer those questions.



Here is a verbatim transcript of Udayan Mukherjee’s comments on CNBC-TV18. Also see the accompanying video



Will it be green for us today?



Surely for the morning and no reason why we should not hold on at least some of the gains, if not all of it by the end of the day because globally things have improved. This bout of regulatory intervention seems far more promising than the last bout and all the markets were so oversold in the US across the world, that it seems likely that we’ll have a bit more of a technical pop. But of course we have got resistances on the way up, it’s not going to be an easy climb.



Too much damage happened after the markets broke its previous low and its previous support. I suspect after today’s gap up then questions will be asked on how much more and the market or the screen will have to answer those questions. So the gap up is a certainty, where we go from there over the next couple of days in the journey to 3,800 Nifty, if indeed we are going there is the more important question.


Asian Indices



The news from global market is good. For the last couple of days there have been very meaningful rallies across the US and the Western markets and across Asia. Though things have improved a bit, some people are skeptical about the long-term impacts of these moves.



Is there more steam to this global rally?



I think the thing about this move in the global market, I have no idea how long it will last is that at least this time the formula seems to be a bit better. I am no expert on global markets and credit markets in the West but the last few times the bailout plans, even to my untrained eye has seen so superficial. But this time around I think there is a little bit more of a cogent plan, the way they are trying to address it and you can see the impact of that London Inter-Bank Offered Rate (LIBOR) has eased which is very important, which means that the credit market might just might be thawing a little bit that’s very important.

The Dow and the Nasdaq can do anything, they will go up 10% one day they will fall 7% the next day. But the real problem is with the credit market therefore the small signs of easing in the LIBOR etc are telling you that now they are probably barking up the right tree, which is that they are looking at counter guaranteeing or guaranteeing the inter-bank loans, they are guaranteeing deposits and those are the kind of steps, which are required to just thaw the freeze in the credit market.



This time the plan looks better and therefore may be the bounce in global markets could be a bit more durable. I say this with trepidation because now-a-days rallies tends to fizzle out in 2 or 3 days but the additional bit of news is that there is not one more accident which is coming, the Morgan Stanley and Mitsubishi deal happens. So for the moment at least one more accident has been averted. So all of this is good news no question about that and we already have had a significant rally in the US market last night, but there could be little bit more juice left there.



While no one is saying it is the end of all the trouble, does it seem that like that cataclysmic phase might be behind us?



I hope so truly because even if things have to worsen, generally or economically later on this credit crisis had to come to an end at some point. I think the steps of the last forty-eight hours probably are the first signs of easing that situation out.



Will it happen tomorrow?- No, the stock market will rally in anticipation of that but the credit markets and the general deleveraging that you are seeing globally will ease only over a period of time. These are big problems and there are no quick fixes out there.



-Udayan Mukherjee, Managing Editor,CNBC TV18...

Hi Udayan, Pumping in liquidity in the system is followed by every Finance Minister of any country in the world, the cash strapped banks will need much more infusion in coming few weeks, as the scenario unfolds slowly, The horror stories are just beginning to trickle in, we have to wait till sensex touches 7000 and below, Training8m, Australia ...

So the more important move yesterday - aside of the CRR move perhaps was the inducement or a little bit of a stick that the Finance Minister showed to the public sector banks to go ahead and start lending. It is like taking the horse to the water but can’t make him drink; I suspect the situation is quite like that now. I hope that this will ease up lending a little bit it will cool the call market to a certain extent may lead to a little bit of a move in the yield and perhaps in public sector banking stocks. But is it the medicine for all the yields in the market today? - I don’t think at all. The timing for this move is poor because we have had a massive global sell-off and we will fall in line with it negating any possible impact of this cash reserve ratio (CRR) move whatever little would have happened but even in the medium-term, I doubt whether this would be terribly material in swinging around sentiment for the stock market. -Udayan Mukherjee, Managing Editor,CNBC TV18...

Traders will do their little bit of short covering etc after the initial gap down of a couple of 100-points and that may well be the right thing to do but this market is not showing any signs of the pain getting over. Sure one can keep on talking about value having emerged but that value people were talking about at 3,800 as well, now we are at 3,100. I suspect that we are not through with price erosion; I don’t know what levels we will reach but just take your minds off Nifty levels and Sensex levels and see what kind of earnings, we may land up with in FY10. I am getting that sneaking suspicions that you are going to see single digit earnings growth in 2010, so all that 15-16% earnings growth is coming down to 10-12%. I won’t be surprised if we land up with 7-8% kind of earnings growth in 2010 and if indeed Sensex earnings are going to grow at 7-8% in 2010, then what stops this market from going down to a multiple of something close to a 9 times. We have spoken about this before the possibility of us heading to somewhere close to 8,500 levels that may well happen. I don’t know what that coincides with for the Nifty but sub 3,000 for sure. I am not suggesting that will happen this morning or in this week or anything like that, it may or it may not but we may go to 3,000-2,900 and then give a pullback to 3,300-3,400 and then in the next leg down, we may even go down even lower. One is always surprised by the levels which the bear market eventually finds a bottom in. Most people do not predict it accurately and people keep buying at lower and lower level, which seem extremely low compared to where the prices have fallen from but prices inevitably move even lower than that. I am not saying that these are targets but I won’t be surprised, if we went to 8,500 kind of levels on the Sensex and may be even 2,500-2,600 kind of levels on the Nifty. I know this sounds very scary but bear markets are scary beasts, one should not be presumptuous about levels at all while dipping your stick and starting to buy. The only thing that’s trending it seems the outflows this morning; it comes with some riders for the whole community as well from the SEBI(Securities and Exchange Board of India)? Yes it does. Yesterday’s provisional figure or day before provisional figure always looked a bit suspect the way the markets moved and that’s been corrected; it was a sell figure finally. Yesterday more than USD 200 million went out and what Sebi is trying to do is to get some more information about shorts which are done against P-Notes. The problem there is that that may well ease off a bit because Sebi seems to be leaning on it; its not banning it and that’s the right thing in my eyes to do. Not to go about doing silly things like banning, shorting etc which its Western peers has resorted to, to disastrous effect. I think Sebi is doing the right thing despite calamitous falls in the markets not to go down the route of just adopting market distorting measures. This one, I do not think they will ban or they will probably just frown on it a bit suggesting to the FIIs (Foreign Institutional Investor) that –‘We are not very happy with this in this market condition ‘and therefore FIIs may simply stop borrowing stock from P-Notes shorting against it because the P-Note window has opened once against few days back and therefore FIIs can short directly with effortless ease. So maybe that borrowed window will stop and direct shorting will start but I would be surprised if this turns out to be the major short covering trigger which people are expecting – far from it. On CRR cut: It’s a good move because the system needs liquidity and the Reserve Bank of India (RBI) is doing its best to throw some money into the system while the problem is not of the magnitude of the credit market in the west for sure, but even so now there is a fear psychosis in the lending market. So like the Fed cut rates but it made no difference to the credit market out there- I am not saying it’s a that dramatic a situation in our lending market or in our credit market but I suspect there is an element of fear psychosis which is there in the system right now, which is preventing people from lending out. -Udayan Mukherjee, Managing Editor,CNBC TV18...

FIIs bought quite a bit yesterday cash and futures markets but Rs 800 crore of cash market buying, some Rs 1,600-1,700 crore of futures market buying did not move prices very much yesterday. Nothing is helping; the put call ratio remains stubbornly stuck at 0.75 indicating that the options market is probably still extremely cautious about the way forward. You haven’t seen a big snapback in the put call ratio to one plus levels despite the rally of the last few days, stock futures continued to shed open interest and at higher levels people are still merrily writing away the calls at 3,700. The mood is still very circumspect that’s what the internal seem to be indicating as well but noting can move stock prices beyond a point it seems nowadays. On bad days when FIIs sells stock prices go down, on good days when FIIs buys stock prices don’t hold their gains so tough going. We were talking yesterday about the possibility of the market marking out a new range for itself as well; does that seem to be happening? It could. You just had a panic bottom last week, we plunged to 3,200 kind of levels and from there you come back to about 3,500. This morning you will probably get knocked back 50-70 points on the index, get between that 3,400 and 3,500 zone. It is likely and conceivable that in the near-term till any kind of fresh panic ensue you, we will probably try and hold out 3,300-3,700 kind of zone. 400 points toss around in that. On good days get closer to 3,700 and on bad days get closer to 3,300. This could hold for a bit because that is the pattern this market has been forming. It plunges to a new low and then consolidates for a few weeks within a 400-500 kind of range and then something bad happens once again and then you go and form a new range on the way down. I do not know whether that familiar pattern will play out this time around but it seems to be what the market or the traders are playing for a 3,300-3,700 kind of zone just for the near-term. But those visions of galloping pass 3,800 well into more than 4,000, those expectations - if they had been raised early part of this week - would have been watered down yesterday. There are rumblings again of more policy action, SLR (statutory liquidity ratio), direct rate action. Can we expect something by way of policy moves this week? I suspect so, because all the policy makers have been talking and that is the right thing to do in this kind of situation. Yesterday we saw that the banks or the mutual fund liquidity window did not have many takers. This morning the call rates have gone back to about 10%, so things are not quite easy. They have tried one bit; call was 20%, it has fallen to single digit but 10% is not comfortable. I suspect you will have to throw more money in now and may well happen today. That is the thing, which is important for traders. We are not discussing macro right now; we have spoken about that last couple of days what is going to come, CRR (cash reserve ratio), SLR, repo all in the realm of likelihood. But if you are thinking of going short now, you have to keep that policy perspective in mind because anytime something by way of policy help might come and could lead to a sharp intra-day spike. It may not be a very durable one but you will get cut out if you are short. So just keep that thing at the back of your mind if you are trying to hammer the market down or take a negative view based on global events because suddenly in the middle of the day you will see 100 bps gone on the CRR and that will lead to 100 points spike in the Nifty cleaning you out. In this environment you are likely to get constant doses of policy impetus whether they will work in the medium-term or not, it is a different debate. But in the near-term, it might hurt your short position and so one needs to be a bit careful about what you are doing here. -Udayan Mukherjee, Managing Editor,CNBC TV18...

the us market rally on the support from banks across the globe... intrest rate cut ...will act as another bailout package..., moreover sentiment is settling quite a bit... alrite even for short term...well the redemptions the us financial ...is facing now can be supported ..as well is also slowing down..due to assurity...and also they are redemped at low rate...housing sector will colapse to further 10 -20 percent...may arise ths problem again...the last wall street recession last for average 13 months...as data..., americans know how to circulate money...short term can be upto 3850 facing resistence... the domestic financial policy which is expected to come out may take banks scrip at high levels....boi and axis .....vcky ...

As suggested in my previous writings, the government has gone ahead and reduced the CRR. However, it will not work – at best it will result in relief rally in stock exchanges. This kind of piece meal approach will not work. It did not work with US government for the last one year. Government has to launch a massive co-ordinated and sustained attack on the problem facing our economy and not throw one pebble at a time if it`s measures are to have any impact. Irrespective of the Government does, we are very likely to hit 5% GDP. If the government acts fast and decisively, sub 5% levels can be avoided. Fundamentals remain bleak. The maximum impact for India will be felt in Q2-Q3 2009 The government needs to do the following SIMULTANEOUSLY :- - Reduce CRR to 4%. - Cut bank bank rates 7% - Cut SLR to 22% now and to 20% in another 4 weeks - Unlimited protection to bank deposit for next 3 years. - Increase spending in infrastructure - start announcing projects and start talking about upcoming spending - Guarantee interbank loans - otherwise CRR cut will not work. - Be ready to provide finance to private companies in trouble, using one of the many government arms - We are at two more risk - in terms of flight of capital :- a) Current account deficit - our creditors worldwide are facing a liquidity crunch - likely to call in the money or not roll over the debt – this kind of thing has had lead to massive crisis in the past in countries across the world. b) Developed economies will withdraw cash parked in India in equities and other assets - if not tackled properly this will lead to a asset/ securities meltdown in India This flow of capital will need to to be managed (more thoughts on this later) Government has to launch a massive co-ordinated and sustained attack on the problem facing our economy and not throw one pebble at a time if it`s measures are to have any impact. Irrespective of the Government does, we are very likely to hit 5% GDP. If the government acts fast and decisively, sub 5% levels can be avoided. ...

But the bigger question that you have to ask yourself right now is - Whether this part of the bear market, which was precipitated by a pure credit market crisis, is that on its last leg? The answer to that may well be yes. That does not mean that the global bear market is over by any stretch. That simply means that one part of the problem is probably getting resolved or on its way to getting resolved over a period of time with the kind of regulatory action that you are seeing right now. The exact analogy for me is India and the crude problem. Crude was the biggest problem and that had crippled us down to 12,500 Sensex. That point looked like the main part of the bear market and now crude is down to USD 80/bbl but we are still in the bear market and we are at a lower low. So a different reason has come to the fore and has led us, we are continuing on the path of the bear market but one of the problems has got resolved, which is crude. I think the exact analogy of this is a global market where the credit market crisis probably is on its last leg. That will get solved; will provide a nice little fillip like you saw from 12,500 to 15,500, you had that rally. Then the other big shoe will drop, which is that basic economic conditions, earnings etc will all start to worsen. So the eye will then move off from the credit market crisis and probably will focus on the real problems of the world, which probably will happen in 2009. So I do not think the global bear market in equities is over. We maybe in for a powerful bounce because one big part of the problem is probably close to resolution. I could be terribly wrong because I am no expert on these things but this probably to me is the likely road ahead which we will see. For us in specific though, would one worry about a slightly synthetic nature to the bounce because it doesn’t seem to be bolstered by money? No it’s not but the Nifty fell quite sharply on its way down it took support at 3,800 only for a bit and then alarmingly it fell 600-points moved to 3,200. Now in that bounce back, I think the first target this morning will be that 3,600-3,650 zone, once you clear that 3,650 kind of zone, which a lot of traders will probably look at very closely, you will eye the next big breakdown level which was 3,800 and at that point there could be some serious resistance. The thing that you play for now is a bit more support from global markets during the course of the week. If the Dow rallies 5-6% more tomorrow because of the specific measures, which might come in as expected tonight then you could see a little bit more of a pop back and maybe the Nifty does make it to 3,800 and then questions will be asked once again. The problem is that even if it did go to 3,800 etc. people will be extremely reluctant this time around to say that we are out of the woods because last time around that view was a dangerous view to take. The way to look at the index now is that you have had a major fall, you have gone to 10,000 Sensex, which is psychologically important level and from there you would have expected from such oversold levels a bounce. The bigger point is the rebound from 10,000 to 12,5000-13,000-14,000 wherever we have to go, and is there another leg down coming because of earnings, GDP, economic numbers etc. which crunches as below that 10,000 level. I don’t know the answer to that but I won’t be complacent in forming a view at this point. What does the Nifty play for then in the bounce back? For the moment, as I said 3,650 for today may be if things remain good 3,800 tomorrow. The problem is that there is no weight of money as you are seeing behind us. Yesterday was such a good day for our markets 7% up you would have thought Foreign Institutional Investors (FIIs) bought a lot; FIIs actually sold a Rs 1,000 crore in the cash market. So yesterday’s rally was such a big short covering rally that you tend to be a little worried about on that score because the rally left the Nifty at a 50-point premium on the futures. We saw some Rs 1,700 crore of Nifty futures buying, so it was just a big short covering rally nothing wrong with that but you would have wanted to see Rs 1,500 crore of cash market buying from FIIs as well, that would have given it a little bit more of an air of stability. May be there is a bit more short covering left but we are still not getting the force of money. Option traders remain skittish while they are happy writing 3,100-3,300 Puts, they are also not reluctant to write 3,600-3,700 kind of Calls. So they essentially believe that the market is still range bound with the previous base as the top. -Udayan Mukherjee, Managing Editor,CNBC TV18...