Even 200-300 pts rally may relieve mkts

It is an important week for the market. There will be important events in this week, which could be a deciding factor for the markets. Earnings season will begin with Infosys from Friday. There will also be some final resolutions from the political front.Therefore, this week could bring a bit of more relief in the markets.

Friday ended on a more positive note:

Yes, and one is feeling a bit hopeful going into the markets this week. One never knows this market turns in a dime and it’s been bad for the last many weeks. But the events of the last three days and the way the markets has been swinging around that volatility and the few news or the events which has staggered this week; I think maybe on Tuesday- Wednesday we will get some final resolution on the political front, end of the week we will probably get a good set of earnings from Infosys, around that maybe if crude helps us a bit by even going down a notch one could get that relief rally that all of us been talking about.

It’s not materialised; it’s just given us one day of a jump and then cooled off. So fingers crossed. It’s just been such a one sided market that, so maybe hoping that this week  at least for the time being it will give a bit more relief even if it just 200-300 or 300-400 points on the Nifty that would be at least relief. 

Asian Indices

Most of Asia is quite with the exception Chinese markets, they are doing very well. China is up 4%, Hang Seng is up nearly 300-points and the others are lackluster though they have cut their early morning losses.

In the short-term how is life looking for the Nifty?

There is a possibility that there could be a pullback because we haven’t had a meaningful pullback the market has been looking to get back into a slightly respectable trading range, but because the bears are much stronger and the news has been incessantly bad, those bear market rallies have not materialized, so this week it is possible because of one or two triggers.

The rally is not materializing because there is not enough incentive for the shorts to cover up and that has been a big absence of the relief rally but if this week politics works out or couple of earnings workout or crude does settle down below USD 140/bbl and this is wishful thinking, maybe you get that trigger for short covering and that takes the market up nearly 7-8%.

We have been talking about this 4,300-4,400 for the last many days and it’s just not materializing, and it goes up 50-100 pitons and cools up once again.

But if some of these triggers were to come about caveat with that, I think it’s possible that we get to 4,300 and if we do get there then there will be quite a bit of short covering which might take it 4,500-4,600.

Would that mean that we are out of woods and that we have put a bottom in place? – I think that would not be a great view to take because it is still a bad market that we are sitting in; the macros are bad, the fundamentals are weakening. This is not to say that bear market is over and from here we will rally up continuously but one good rally has to come because if this is a bear market there will be a strong bear market rally as well which we haven’t seen so far, so maybe in July the market is a little bit more constructive and we do get a nice little rally. It might just get better before it gets worse if it has to.

Will the market be more nervous about politics this week or is it become a side performance?

I think the market could well get more relaxed for the near-term because it’s almost like some kind of a solution has been worked out. So in the near-term the dire situation for the market, which the bears might have pounced on in this kind of a sentiment situation, which is the Left withdraws support and the Government falls that would have been a little bit of a catastrophe for about 48 hours. I don’t think it would have been a long lingering thing but for 24 and 48 hours there would almost certainly have been a knee-jerk sell off.

Now the possibility of that sell off does not look as strong, on the contrary you might by the middle of the week take the call that the government survives and it survives till March, April next year. So you are okay for the time being and that might prompt a little bit of short covering because the bears short for many reasons and this might have been one of the planks for them to be aggressively short, that politics will also work out their way come this week and may be now that card is taken off the table, and say okay one reason less to be bearish.

So I think in the near-term it might actually work for the bulls and might be the reason for the markets to move up, if indeed come Wednesday, Thursday we figure out that it plays along expected line, which is the Left withdraws the Samajwadi Party (SP) steps in, the Government remains in place.

Does it dispel the uncertainty going forward? - no it does not, I think this lingering uncertainty of what happens post elections in early part of next year remains for the market. So the rejoicing or the celebration might be just temporary but then a temporary celebration is better than a temporary sell off, which looked more likely a week back.