CNBC-TV18’s Executive Editor, Udayan Mukherjee - Today would be very disappointing for the bullish traders, no question about that. You could see the signs because the headwinds were very strong for our markets and today’s market weakness is not entirely to do with global weakness. There are very domestic factors which are affecting our markets. The two sectors (technology and financials) are specifically cases in point. The way banks have sold off today and led by the stronger Private Sector banks like HDFC Bank, which had just recovered after the fall, they have sold off 6%-7% a piece.

This whole inflation interest rate scenario is not looking good at all, while some people might be in denial and saying an aberration here and an aberration there. The markets are getting really worried about it now almost nudging 7%. More than one investment bank is coming out and saying forget about rate cuts now, there is a window open for rate hikes from here. Too many of them have come out and said we are not expecting anything by way of rate cuts for calendar 2008, and all of this has vitiated the mood considerably. So I suspect today’s fall in a large part is domestic in nature. Of course, the global factors have not aided us, the fact that Asia and Europe are down, today have also wade on the camel’s back and I think inflation is probably is the single most important culprit.

Also, the largecap leadership was actually with technology over the last few days and the fact that the market’s getting the sense that the RBI might just let the rupee appreciate to deal with inflation is also querying the pitch for the IT Stocks. So the markets robbed off largecap leadership and IT; Bankings come under increasing pressure because of inflation and those twin loads have been extremely heavy for the market to bear today.
 
So it is a very disappointing trade, I suspect traders would have held out their positions till about 4,800 thereabouts for the Nifty long, but I think the fact that the Nifty is completely trading below the 4,800 mark. I suspect the bullish traders have started covering up their positions and the bears would have started getting active and you can see that in the Nifty futures, the fact that fresh shorting is beginning to happen as soon as the Nifty broke down and came to around that 4,800 mark.

I hope April month will not be as tough or rough month as the one gone by because we have had two rough months because in January the Nifty was down 16% in the series, down about 10% in the March series. I don’t think the market has an appetite to digest another 10% cut in a month. So I sincerely hope that the guidance from the technology companies and thereafter the results do turnaround sentiment a bit.
 
But the way this is going it’s not good because just few weeks back we had a move from sub 4,500 to more than 5,000 plus and that got sold into; in two days we lost all those gains. This time the approach was far more promising; there was better breadth, there was better help from the global markets, we moved up slowly and we got a 10% move, it was looking promising to get above 5,000 and then the news flow is such that you get pegged back below 4,800 straight away once again. So this is undone a lot of the confidence which was nascent which was just beginning to build-up over the last few days.
 
The only silver lining that I can see is that midcaps are not under performing largecaps. So you haven’t got to that stage where the traders who might have just built positions over the last couple of days or bought into the severe decline in mid and smallcap they have not thrown in the towel yet. On Friday midcaps outperformed, even today they are outperforming. So traders will probably hold for another day or two before they throw in their positions in the hope that all is lost but this is not shaping up well at all.
 
I seriously hope for the market sake or for the traders’ sake that today by the end of the day we see some covering etc which can take us back above 4,800. Because if we do close below that I suspect traders will lose quite a bit of heart and then again you will get into the bearish kind of grove. We are not very far from 5,000 but we are not very far either from 4,500 level that we bounced off from.

I think those global cues will be very important. The fact that Europe has not opened up very well and the Dow Futures has not done anything special since morning. It is just about putting a lingering fear into the market that the Dow having retraced a bit over the last week, may also start the current week on a bit of a weak footing and that would not be good news at all.

These are all adding to the pressure on the market. You just had a nice, nascent recovery and you needed a dollop of good news going into this week to build on it. On the contrary, what we have had is just bad news. Global markets are unsupportive, inflation bad, people are talking about interest rate hikes. Cairn’s numbers bear some of the scars of write-offs and Forex losses, and ICAI is probably making sure that many other midcap companies come in with similar numbers.

So, the mood has got vitiated once again. You never know where it will stop. But for the moment I think those are headwinds that we have to contend with and global markets would be very important.

Imagine if we do close somewhere around these levels, sub-4800 and tomorrow morning we faced with some more red in the US and Asian screens, then the trend would be broken and you would be looking at something like sub-4700 levels. Beyond which I don’t think any long trader would be carrying his positions.

So, this has been a setback. It has been extremely disappointing the way newsflow has come over the weekend since Friday and the way the market has shaped up today. The only silver lining is that some of the midcaps have held out, which is at least not smacking of capitulation like we saw last time around, the market went to 5,000.

I think in two days we lost all our gains last time around. At least some segments of the market have held out today, which gives one a bit of hope. But nevertheless, bullish traders would have got cutout around 4800 today again.

In the short-term we are getting some kind of a fabric in place and that has been rattled a part again. It is happening with an alarming regularity now, which makes you very uncomfortable. You could still get away, there is talk of an April rally, global markets have not exactly broken down over the last couple of weeks, and they have been quite resilient. So it could happen that we went close to 4,950, we now get pegged back closer to that 4,500 mark give or take a few points and we consolidated, keep doing this tooing and froing between 4,500 and 5,000. That is certainly a scenario which is possible and that is not such a dire scenario in my eyes.
 
The only thing is that repeated attempts towards the end of a bottom are never good signs, typically when they happened with the kind of speed that they are happening. So one would be a little apprehensive and worried about what is going on. But I still think these are not technicals driven kind of markets, there is no overleverage. I do not think any level as such is being paid any great respect but these are bigger forces which are shaping the market right now. Inflation and interest rates which are absolutely core to equity markets, the fear of earnings hits because of any of these forex transactions etc leading to downgrades and the fear of global markets coming down once again.

Legitimate fears, which is why the market is struggling at higher levels. So I do not know whether this is about technical levels etc those get violated nowadays very easily. But very disappointing today, the way it has panned out. Let us hope that we can get back above 4,800 by the end of the session because if we do not, maybe we are opening ourselves for some more punishment for the rest of the week.