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(Interview Transcript)
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There is no good news from the global markets; the cues are terrible. We may get pegged back as a result. The markets may try to hold on to Tuesday's support levels. The day does not look good for trading. The midcaps and smallcaps, especially may see trouble.
We haven’t used the term the Ides of March yet but it seems like that’s how it’s shaped up this week?
Yes and its not playing along desired lines. Yesterday global markets were a bit stable but we had our day off yesterday so we couldn’t even use that to pullback to close to 5,000 and this morning when we come back after a one day break, we come back with terrible cues from the global market. So this morning we will once again get driven back, I expect to those levels which we took support from on Tuesday those are very important levels from a trading perspective, from which we have bounced a couple of times but I suspect those will come into test for the Nifty once again this morning.
It doesn’t look like a great closing to the week that we are headed for and I suspect midcaps and smallcaps, which have been anyways weak for the last couple of sessions, might have some more trouble today. So straight away early in the morning we are on the back foot, let see how we can deal with it in the second half of the session.
Yes and one can understand why sentiment is not rebuilding. We are just not any getting help from the global space and people have once again started focusing on that as the central cue for the market. So every morning there is something new. Today we have got home foreclosure problem, we have got loan default problem. The S&P is dangerously closed to 1300, the way its going if we get bad jobs data today and it’s an important set of data which is coming in later today from the US which will keep the markets on tenter hooks in any case. If that is not good and is not expected to be great then we have got 1,300 breaking on the S&P, which cannot be good news. So not technically, but psychologically it makes a bit of a difference there.
The markets now saying, “we have to get 75 bps in March when the Fed meets.” and its become a 98% certainty from the Fed futures for some reason if the Fed having looked at USD 105/bbl crude and other commodities and the way they have moved chooses to do 50 bps; you are opening up the potential for another big disappointment there.
Crude is at USD 106/bbl that can’t be comforting for financial market, yen is at 102 nearly that’s broken down quite significantly over the last few days, volatility is increasing again. None of these are good things and you are walking in every morning into trade with the huge headwinds of these kind of global news flow; crash in the US, crash in Asia, crude is going on boil, yen is crashing, volatility rising, some new skeleton is tumbling out of the closet in the US and in this kind of a situation one just cannot expect sentiment and confidence to rebuild. So that’s our problem, that’s our baggage, globally we have chosen to focus on the US now and that’s just not comforting at all.
Where does that leave us?
We go to 4,800 in the morning I suppose or dangerously close to it on the Nifty that is the level, which everybody has his eyes on. So I think you have got a dangerous kind of situation if this morning we get to 4,800 and even if it break it intra-day then I suspect there might be a bit of panic because 5,000 broke quite easily and now everybody is figuring out or hanging on to that 4,800 as a bit of a last straw because that was the level which held out last time but chances are it will be tested if not broken early in the day today. It is not a great situation even technically speaking.
The bullish traders at least have just been trying to latch on to some kind of support. They started at 5,200 then 5,000-5,050 now 4,800, which will be tested this morning and none of those supports are holding. We are back to that January kind of scenario where everybody after this morning will be talking about a retest of the January lows already some people have started talking about even lower levels, more people are beginning to talk about a bear market. I do not think trading sentiment will be very good and I suspect all of this will probably force away people from buying at lower levels. In any case they do not want to buy but the more bearish the talk gets and the opinion gets, the more skittish and reluctant will people be to go out and buy the dips even at important support levels. So maybe the bounces that you are seeing will get even shallower and shallower and downsides might open up. Generally the environment is not very conducive for major upsides in the market right now.
The midcaps have had a very rough week though, through these past few days and money is just getting completely dry like we have been discussing. What is that lead this whole universe?
Without support because I don’t think there is much by way of buying happening in midcaps. I think there are two things, which are happening in the midcap and smallcap universe for which their underperformance is getting aggravated over the last few days. One, I think there is some residual brokers selling which is going on from the January crash and the more you talk to brokers they will tell you off the record that a lot of people got burnt very badly and they were sort of hoping that stock prices would stabilize and they would not have to cough up because of the margin calls etc. But now after the second leg of the fall and supports breaking I think some of that broker going belly-up syndrome is playing up; small brokers I think. But I suspect that is where some amount of selling is coming in from midcaps.
You don’t need a lot of selling to take stock prices down in this kind of a market. A little bit of selling on couple of stocks and they start getting depressed because there is just no buying on the margin. There is a little bit of F&O unwinding, which is also happening on the margin not huge because this market is not heavy in terms of stock futures. But on the margins slowly, everyday one is beginning to see some of the liquid stocks beginning to shave off some open interest and that’s not helping some of these midcap and smallcap stocks. I suspect that you are coming to the stage now where HNIs are preparing for their last bit of capitulation.
The capitulation has happened or had happened already in the futures market. But in the cash market a lot of people were holding on to their portfolios hoping that they would see a constructive move in a market maybe around the Budget the market would get back to 5,500-5,600, midcaps could rally giving them a good exit. But that never happen and you would probably see in the last few days some of that last bit of selling which is cash market delivery based selling in midcaps, which is also beginning to happen.
Liquidity is very constrained right now and you look at the figures everyday FIIs are not selling much but they are not buying. There is no buying happening from them. Mutual funds are not buying; domestic institutions are not buying at 4,900 Nifty or 4800 Nifty. So this market has well a little by way of buying support and even incremental small selling on the sidelines is taking stock prices down quite a bit.
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- Jul 25, 16:01
- Last Price
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