Mkts still waiting for big trigger

The markets are doing nothing at the moment. If the volumes had been better, we may not have seen the kind of swings that we are currently seeing. Today too, the markets may see volatility due to the intra-day volumes. But the markets are waiting for the big-trigger, still.

Our markets:

The week started well, we lost our way a bit yesterday and today the cues are flat once again. Couple of earnings coming in so we will wait and watch for those closely but there is nothing in the global markets to nudge us either way convincingly. So we remain in a trading range; we will probably trade some more in this range till some big trigger comes about and moves us up and down. So expect one more of those maybe intra-day volatile but quiet on volumes and quiet on directional movements. That’s what we been resigned to for the last many weeks and today should not be any different.  

Still meandering like you said?

Yes, no direction out here at all one day up one day down. I think we are actually in a fairly boring market. It is just that volumes are so low that everyday you get the optical illusion of a lot of volatility 400 up-400 down but essentially the market is doing nothing.

If the volumes were a bit better-the volumes are low for many technical reasons as well then I do not think we would have had these kind of large swings in the market either. We would have just been pottering around 100 points this way and 100 points that on the Sensex, which would make it even more boring than it seems today.

I do not think we are going anywhere today amd I would be very surprised if we made a big directional dart. So it would be range bound maybe a bit of intra-day volatility because of the volumes but essentially still waiting for that big trigger.

Asian Indices:

Quiet day across Asia today; some are down some are up. Japan is down half a percent, Singapore up third of a percent, China is down 1.5% again though it held out yesterday and the Hong Kong market is up barely a 0.25%. So mixed bag from the Asian scene today, no great cues for our market.    

What is the best case scenario for our markets right now that we continue to grind and trudge and atleast don’t crack too much?

That would be a perfectly acceptable scenario. As we have been doing for the last one month, if the market spends a lot of time in that 4,500-5,000 zone for the Nifty and gets away with it, I think it’s a good scenario and if that is the base case then no need to worry too much.

That is a view which a lot of people favour at this point in time that the price correction is done, we have fallen about 30%, in many stocks we have fallen about 50%, the average cut in midcaps would be closer 40-60% and so a lot of the price damage has happened and now we need to spend more time, licking our wounds, cosolidating, waiting for the news flow to improve and the fundamentals to recover somewhat and then slowly the upward journey might resume. I don’t think there is anything wrong much that it maybe painful while it lasts in a holding a 500-point Nifty range at these levels and then trying to build the reconstructive phase for the market probably later in the year.

But markets are markets, one never knows what lies ahead and whether there be more downside and whether it’s optimistic that we will just hold this range and consolidate and then move forward from here on. So the answer to that is a little difficult to surmise for mot people. In the near-term we are still range bound and one can see that the range has got narrowed down to about 300-250 points on the Nifty  now.

Can anything nudge us out of this range? – Although there is the Friday inflation figure to reckon with in a couple of days but I think the closest you can have to a trigger is on Tuesday when Infosys comes out with its annual guidance and if there is a positive surprise which is a bit higher than what people are expecting, then we could make a journey to 5,000 on the Nifty, so Infosys could propel us but if Infosys is ultra conservative and the guidance comes in at a lower end of expectations or below it then its entirely possible that the market drifts back, technology gives up gains and we go back to retest the lows of January which is close to that 4,500 mark.

I don’t know about the breakout beyond this range but on Tuesday once you get the technology guidance it will probably be a step to the lower end of the band, or the higher-end of the band which is not saying much but right now we are bang in the middle of that trading range and I suspect by the start of next week we will be closer to one end atleast.

On global cues

I think the issue in the US right now is earnings because their earnings season has started and has not started very well. It started at a point, which is a sort of a pivot point for the Dow Jones. I don’t follow technicals so well but people who do tell me that 12,600-12,700 on the Dow is a bit of a make or break level like 11,600 thereabouts was. So from there we rallied now we have come to the first halt and from hereon if something can support the US markets and nudge it above that level then you probably could get a clean 1,000-point rally on the Dow which takes you back upto 13,500.

That would be a very constructive signal for all markets I imagine. But sadly the earnings for a last couple of days have not been particularly supportive and that’s the risk whether in the next few days aside of the commodity problems, you have earnings in the US probably reiterating the concerns. Right now the US stock market is in a phase where it wants to defy the bad economic news and move ahead. Now whether it can also defy the bad earnings news or the bad corporate news and move ahead is something, which will be tested over the next one week ten days. If it can do that it will be an extremely positive signal.

But earnings haven’t started well so if we get more disappointments and more cutbacks in earnings estimates and de-rating of stocks there, then I think the Dow might struggle to get above that 12,600-12,700 kind of level, which again puts it back in that trading range of 11,600-12,600. So we need to see what the outcome of the earnings season or the first week ten days is on the Dow to get a clear picture of what’s going on with the global markets. I think now all other markets since the Dow is within that range are probably moving in individual directions with their own kind of cues like we are. It’s become a little bit more decoupled if you will in the last few sessions.