Expect mixed global cues today

US financial major Merrill Lynch's results were bad and so were Google's. The US markets may not look good ahead and that is worrying Asia.

But the good news is crude fell from USD 148 per barrel to USD 130 per barrel. There are global cues, but mixed ones.

Global markets nonetheless have not been a bad cue to lean on:

No they are not but the thing with the market is that it always looks ahead and never looks behind and if you look behind the cues are good for the day which is a 200 point rally on the Dow but you can see across Asia that everybody fears that tonight may not be good across Asia because we have had fairly bad earnings coming in from Merrill Lynch disastrous numbers, Google’s numbers were well short of expectations and even Microsoft.

So the Dow futures are also suggesting that tonight may not be a good night for the US markets after the rally of the last couple of days. That is worrying Asia. I suspect we will also not be able to celebrate in an unfettered manner given what the Dow future is suggesting.

Of course crude is good for us, we are back down to USD 130/bbl so USD 148/bbl to USD 130/bbl is a big fall. We have been very crude dependent, so if the call is that crude is headed lower then certainly that has caused for celebration for us.

However, let us see what today crude behaves like because we have broken USD 130/bbl, is it going to slide further or is it going to bounce from here? So important global cues but they are a bit mixed for sure this morning.
 
How are our market going to digest all that because what we need is some follow through after yesterday’s performance?

There will be an attempt at an a move up because the mood has improved somewhat after yesterday’s move so maybe a bit of move up is likely here but tough to say whether we get back past 4,000 early in the day then whether we can climb to 4,100 levels whether we can stay there or by the end of the day the nervousness will come back given the global cues, so difficult to say but at least in the near-term the first seeds of a bit of an up move has been sown with yesterday’s move and with crude cool down to USD 130/bbl but next week is so important that one do not want to pre-empt what the market will do because by Tuesday we will probably have a fairly decisive kind of move in the market, a couple of 100 points easily if not more on the Nifty either way.  

First a word on inflation and whether that sub 12% can even cause temporary relief?

Yes, little bit comes as a bit of a relief because the market I think was expecting 12% and you can see the reaction in the bond market as well the bond yields have cooled off. The alarming rate at which they had shot up to 9.5%, it was setting itself up for a bit of a correction in any case because it had gone up too fast and now that inflation has not surprised on the way up, I don’t think 11.91% is a very comforting number per se. Don’t go too much by what the politicians are saying about whether inflation is cooled off, because they have been saying the for last many months.

Generally there has been no upside surprise this time around and to that extent given that bond yields have cooled off, the market might choose to take it little bit more positively as well this time around. So fingers crossed, I think there are many things, which might help the markets if it chooses to take those on board today and may be extend the rally a little bit higher but in inflation there are no shockers this time around.

What kind of levels do traders work for the Nifty?

First we need to get above and stay above the 4,000 mark that makes a bit of a difference psychologically. Whether you are doing technical levels, there are many doing rounds, 4,050, 4,100, 4,200 etc, everybody has got their own level. But we need to start the day above 4,000 which should not be very difficult and try and trade above that for a significant length of time because that will sort of take away the scare of 3,800 at least visibly for the moment. Can we build on this that depends on crude as well partly but we are going into a very important week and by the end of trade today, people will take stock of their situations and then trades once again.

Are people going to keep positions open in a scenario where the US might actually have a rocky session tonight and come back with a possibility of gap on Monday?- I think some long traders might choose to take profits. Again as you get into the next week, Monday there would be frantic news flow coming in on what will happen with the vote of confidence. Tuesday the cat is out of the bag and at that point I think you will get a sense of direction for the market.

If indeed the Nifty can circle around that 4,000 kind of levels till we get to the confidence vote and the vote passes then there is a good chance that the market in the near term can inch up to the 4,300 kind of levels that we were speaking about last time around.

But if the government is not successful then we get back not only to the 3,800 but maybe even lower than that. Before the pivotal events, the traders generally don’t take very large bets, so you will see a touch of volatility and for the moment looks like the market could be just circling around that 4,000 mark till we get to the vote of confidence; maybe a bit higher or maybe a bit lower.

And that is the problem because next week is so big by way of triggers, at least short-term triggers that today might just be stuck in the middle?

It is because I think today you will see a touch of volatility because there are reasons to be optimistic because yesterday you are coming on the back of a 500 points rally. I know the post market things are not great in the US and Asia is not picked it up but even so the US had a rally, crude is down to USD 130/bbl and it is not a small cool down, it is an USD 18/bbl cool down from the peak. So at least for the first time you have got a glimmer of hope on the crude front as well, inflation has not surprised on the way up and earnings have not been very damaging, you haven’t got any shockers from the earnings front.

All of these put together, one can make a case for a slightly higher level from here and the technical pull back that we all have been discussing might actually take us a bit higher from here. But eventually I think Tuesday’s hump needs to be crossed before the market can take a little bit more sanguine call on the near-term direction before that traders would be kept guessing and you might see a touch of volatility in the market as well.