Difficult for mkts to go up from here soon

It’s been a weak sort of a week for us:

Yes, it is and we are in a sticky kind of a market right now and it is difficult for the markets to go up, it’s not cracking and that’s the good thing. I think the single most important thing for through out the month of May and last week was that we are not seeing the market breaking down. Wth so many headwinds, when the markets does not breakdown below the levels like 4,800, which everybody is talking about, then you sense that there is some amount of resilience in the market because otherwise it could have sold off down to 4,400-4,500.

We are sticky on the way up but we are showing resilience on the way down, which makes for a range bound situation which we are in but let’s see whether we can strike out some amount of an up move back to 5,000 this week.

Do you think 4,800 has sort of become sacrosanct for the Nifty?

It is important psychologically for sure. So we keep our fingers crossed and hope that level does not get broken this week because if it does I think you will see a semblance of panic in the market which you want to avoid typically at the start of a series.

Asian Indices:

It is a quiet morning for global markets. The cues from US are fairly quiet, Asia is actually picking up. The Hang Seng is up more than almost 300 points now, Taiwan is pretty strong, Nikkei is smart, China is up half a percent; more good than bad you would have to say the cues from Asia this morning.

Nifty  was threatening to break that 4,800 level but it bounced back from there, you think the range have broadened to 4,800-5,000 or is it threatening to even violate that?

It has not told us much frankly over the last few days-last few weeks actually-it has been range bound and it is not giving you a signal much to the distress of traders on which side is going to break out. So I think it is a toss of a coin on whether we can get back to more than 5,000 or we go back and test 4,800. I think at least just for today and for the start of this week an attempt will be made. Because of a few things global markets do not seem very unsupportive, crude is still below USD 130/bbl, the rupee very importantly has come back to 42.17-42.18 and that helps the global sentiment a little bit.

I think the last tick on FIIs is also not very negative as they have been consistently. If you put it altogether, I think traders will want to play a little bit of an up move early this morning or the first half of this week. Whether it sustains or not we will have to hold.

The other thing is the month call, May has traditionally not been a great month for the market and we have lost about 3% in May. But typically when May is not very good, you tend to see small bounce backs happening in June. June has not been such a bad month historically speaking not that those things are very important in the global context but at least I think from a trading sentiment point of view people would want to feel that the market will not break 4,800 on the way down in fact may even attempt a move upto 5,000-5,100 kind of levels.

So let us see-these are very difficult to predict, a lot depends on crude as well and the government’s policy moves later this week. We are in a fluid situation but would be very surprised if the next day or two the market makes a decisive break below that 4,800. I think at least for starters we will attempt to get above 4,900 and probably even make a journey to 5,000 Nifty.

Crude has increasingly become an important trigger both economically and politically as well?

Crude has also become emblematic for the market. Every morning you wake up and more than looking at the Dow and the Nasdaq, now a days you look at crude because every body has now realized that for a market, which is such a big commodity importer crude has to cool down to spark off an effective rally out here.

That is what everybody is talking about, for India to start outperforming again globally, we need a cool down in crude, and we cannot have crude at more than USD 130-135/bbl with India outperforming the other global markets. So I think the trade that a lot of people are now expecting and looking for is that crude cools down and therefore some of the hedge fund money starts coming out of commodities and crude, and if that happens then the money will also start coming out of some of the commodity producing countries like Brazil and Russia and therefore India might be the beneficiary of a lot of the global equity flows.

I think it’s a by part an inflation hedge argument, part a liquidity inflow argument, which will happen if crude cools down and sentimentally it will be very important. It is crude which has become the emblem for any kind of an up move, which can happen from here on and I think it is important in the context of what’s going on with flows and outflows.

Sentimentally FII flows are very crucial. To give a small number to illustrate that this year Domestic Institutional Investors (DIIs) have pumped in USD 8.5 billion in the first few months of the year that’s gone virtually unnoticed and what everybody is talking about is the USD 4 billion of money, which FIIs have taken out, more than double of that has come in from domestic investors but sentiment is such a thing that sentiment always latches on to of what the FIIs are doing and not what the insurance companies are doing.

So we need crude to cool down for that back-to-India-trade to play out, which means every month you will see more than USD 1billion coming in from FIIs and that will be the big reason for the market to rally. So whichever way you look at it crude becomes the important thing, if crude cools we probably have a rally on our hands.