Yesterday thehad a recovery; they seemed reluctant to go down more just yet and we saw short covering yesterday. So maybe there is a glimmer of hope this morning though the global markets are not exactly rallying.
We may just take another small step forward on the . We hope that because we have been pulling back these couple of days from bad gap-down openings.
Even if it’s a quiet day that’s okay considering the way the week started up?
I think what has happened this week is that while the markets have not gone up and they have tended to go down at lower level there is support which is visible and that’s very important because the news flow has been so bad this week that the markets could have easily broken down to 4,200 kind of levels and there was legitimate reason to do that. But it’s not chosen to do that, so maybe there is a feeling that even if there are lower levels to come later just right now the market is spent its energy and momentum on the way down and in the near-term it’s not ready to go down substantially more from where we have gone down.
Maybe from those levels there is a bit of support coming in and it’s entirely possible that we get a bit more of a bump-up over the next day or two. Last time we said it, the market went back substantially so does not want to jump to conclusions but wouldn’t be surprised given the kind of mood and what one hears from the street if the Nifty attempts to scale up another 50-100-150 points – it is possible.
Asian Indices:
Asia is sort of mixed and soft this morning, no great cuts out there but very quiet. Nikkei is down a tad, China is down 1.3%, the Hang Seng is down about 0.5%, Korea is absolutely flat and Taiwan is up a bit. So no great cues to take away from there.
How is it looking though for the market? Does it seem we might keep wallowing in this mess for a bit?
Yes, we are in a bad situation and at 4,400-4,500 Nifty, we are in a bullish situation obviously but the only thing which has come out this week is that there is support at lower levels which gives one little more heart. The equity environment is quite terrible right now but from a technical perspective maybe people have exhausted themselves on the way down by selling stocks down already because of the mess and right now there is not too much propensity for the market to go down in a straight line like it has been for the last few days because the market fall has been quite dramatic; not just the Nifty if one just looks outside the Nifty, the fall has been really sharp. So right now people stop selling after a point, the buyers have not emerged but at some point the bears also say, “Okay the markets not falling too much let me cover up once and then see what happens from hereon.”
Two days back we were talking about this that maybe from those lows of 4,350 a little bit of rebuilding back up to those 4,600-4,700 kind of levels on the Nifty is entirely possible because that’s how markets move. One do get short covering rallies from time to time but one day we got a pullback and the next day we got hit with repo rate and with the global markets and therefore the market went down, gap down yesterday in the morning. So, maybe that aborted up move, which happened day before yesterday and yesterday has sort of come back into play after yesterday’s pullback in the second half of the sessions.
I think traders will now once again say, “For two times we went sub-4,400 and despite fairly bad news we did not go lower and that to the bears would signify that the market probably does not want to go down too much.” All traders pickup signals from the screen and the signals from the screen for the last couple of days have been that in the near-term maybe one should play for a short covering bounce which might take us a bit higher. I do not know if today we start stronger whether that will hold because the mood is bad, the news flow is bad, the fundamentals are slightly shaky at this point. So it’s entirely possible that we start the day and make a move towards 4,600 but later on that get sold into.
Today will be a test of whether the bulls can push up to more than 4,600 for the Nifty and make it stay there. I think it’s an interesting time but traders’ last couple of days would have lost money both sides, the bulls would have lost money, the gap down yesterday, the bears might have lost money if they shorted yesterday morning. Let the market find its feet; it’s not very easy to trade but doesn’t look like complete despondency for the bulls this morning as we go into trade.
Does inflation at least right now become a bit of a come and go event because the problem is the figures we are talking about 9-10%?
This week’s event is a non-event because it doesn’t matter whether it is a 8.2-8.4%, anywhere in that range is fine for the market its bad, but it’s a no devil. In a couple of weeks time you are going to get the oil hit, which will take you up to more than 9%, so that’s the number which people are focused on. These numbers are just passing time till you get to that point. But I get the sense that right now for inflation, interest rate, Repo, Cash Reserve Ratio (CRR) situation you have got one jolt, you know that the bad news of 9% coming two weeks down the line.
So just for the near-term it is one shock, which has been absorbed in the system, which is not to say that the risk has abated for the stock market it remains a real and eminent risk for the market, there is no question about that. But the the bond and the stock markets has been slowly pricing it in for the last few days. The news has come out, it’s been absorbed and therefore for the moment I think you could see a gush of relief saying okay this one is a known devil, it’s done, pending the next shock which will come and I am sure that it will come from the inflation front or the interest rate front. Maybe few weeks down the line, few months down the line and then the market will deal with it for the next leg.
For the moment I think the inflation thing is done for the next fortnight or so at least and to that extent it is probably not going to be the determining factor leading the stock market up or down, just for the near-term.
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