Yesterday we didn’t make a big dash at 5,000 but today the global cues are supportive again. 2% up the US markets, most of Asia is also up and up quite a bit. So today for starters we have got a good chance of making a dash at 5,000 mark, we didn’t get quite close to it yesterday but every opportunity today at least for starters, that we get very close to that psychological important mark.

At 10:30 we will have inflation numbers coming out but we did not quite sell-off on the data last time. But that is something which might also have a bearing on whether the markets can sustain at those levels, even if it starts strong. So interesting morning of trade, lots of events staked up today but the start should be good because global cues are very supportive.  

Friday just got scaled back by one day but this is going to be another one of those actions packed days?

It will be and we have got good shot; the bulls have got a lot of help this morning, yesterday they could not quite hold out after a good start and one could understand that there is resistance at higher levels. But today we have got very benign global cues, inflation is an issue and we will find out how it comes in half an hour after the market opens but the test will come in the second half. The morning should be good; we will probably get up to close to 5,000 if not there but whether we can hold on to it and go into a long weekend, feeling confident is the big question for the market. So its going to be an interesting day, I think there will be a bit of a tussle in the second half so might make for some intra-day volatility as well.  

Asian Indices:

It’s a good morning for global market. The US looks very smart and Asia is largely smart with the exception of China, which is a different market all together. But Nikkei is up more than 2%, Korea Composite is up 1%, Taiwan is up less than 1%, Straits Times is up 2% and Hang Seng is looking very smart as well. So good gains across Asia no problems there, the cues are quite benign. 

It was 7.4% last week, how dangerous is the inflation spectre this time and does fury usually come with follow-up?

I think if we get 7.3-7.4 today as is the general expectation, I don’t think the market will fall off. You saw how well the market dealt with rough inflation figure last week so now it’s given. The market does not fall off when devils are known; it’s when it surprise that it falls off generally.

Enough talk has happened on how inflation will remain sustainably high for the next few weeks maybe in a fortnight’s time it will cool off a bit. So it’s a known devil and to that extent the market probably will not sell off if more than 7% figure comes in today. If it gets really out of hand because nowadays these numbers are unpredictable and comes in at 8% which is unlikely then the market might sort of retrace a bit but otherwise its pretty much in the price or is expected at any rate.

I think on the policy responses I quite liked what the Reserve Bank of India (RBI) Governor said that “one have to understand where it’s coming from. the government has to be seen to be doing something whether its the wise thing or not is a matter of debate which is what he said himself. But at least if it’s trying to show sensitivity then it’s not such a bad thing. I hope that is not a reflection or an indication or a hint of how he will approach monetary policy on the end of this month as well because if he also wants to be seen as doing something which is sensitive in nature and the translation of that into action is not just CRR but even a repo change then I think the market has something to worry about.

Its one thing to be sensitive to what the poor are facing in terms of food prices; its quite another to go about calling everybody a cartel. So one year back cement was a cartel, now steel is a cartel that’s a conspiracy theory. Everybody in the world is a cartel conspiring against the government to keep inflation higher. So this is just empty fury which is talking; its not progressive, its doesn’t help inflation, its just venting fury at a problem that you cannot fix by pointing fingers at some people and calling them cartelisers or anything like that.

So don’t read much into what the Finance Minister saying; he is in a corner, he has to deal with lot of fury in the Parliament and therefore he is throwing stones at other people to deflect some of the anguish against him as a policymaker. The biggest fear is that, I don’t worry about cement of steel because cement is a derated sector already, steel almost semi-derated so already has taken quite a bit of stick so to that extent a large part of the damage is in the price.

The only fear for the market now is not steel or cement which is already derated; it’s whether the government will lean on the RBI in its effort to show that it’s doing a lot for inflation; that is the only risk from an inflation perspective or a policy perspective to this market but that answer we will know in a couple of weeks time.   

Fortuitously the global picture has improved a little bit and it is a little bit like us, the numbers are bad but they are not as bad as expected and that causes a bit of a snap by?

Precisely, the bar has been set extremely low this time around. So though the JP Morgan numbers were pathetic, 50% down profits, the market celebrated and the stock shot up. That tells you exactly the kind of mood global markets, US, India everybody is in. Everybody has got into a completely pessimistic groove. They are in a huddle, the bar has been set extremely low and to beat that very low bar you do not have to jump very high you just need to tell them I am bad but not as bad as you think and that is good enough to send stock prices up. It has happened here with our earnings for the first couple of ones, which have trickled out and it is happening in the US as well. I think that is the trade, which is playing out in the markets now. It is not that the news flow has changed dramatically for the positive. It is just that maybe there was over pessimism and some of that is dissipating or unwinding right now which is why you are getting that contrarion pullback trade because there was too much which was priced in by way of pessimism.

One needs to understand where this optimism is or where this rally coming in from. Crudely it is a short covering rally not so crudely it is because the market is probably too pessimistic and it is finding out the news flow is probably not as bad as they thought it would be. So that is pretty much the global picture as well. The Dow keeps coming back to 12,600, which is good news and we have all been talking endlessly of an April rally- half of April is over so hopefully in the second half we can strike out a little bit more. Maybe the Dow could really breaks 12,700 and goes higher in which case maybe there is a case for our markets to rally up as well and if all of that falls into place then our chances of breaking out of a narrow range gets higher.