It was a bad day yesterday and thankfully this morning we don’t have to content with another US sell off. US markets have sort of behaved themselves, which is why Asia’s is okay, it is a bit mixed but more green than red, so no dismal cues coming from Asia this morning. But we have got lots of other events which are determining market sentiment at this point. It will be another interesting journey as we head into trade today especially after all that’s happened yesterday.

The mood will be a bit sour from yesterday?

I would imagine but we got sold very hard in the last one hour of trade yesterday so to that extent there might be an attempted pullback because I think in the last one hour of trade people got the feeling that the US might give red today and we haven’t had that. So inline with the other Asian markets we could attempt a pullback to 4,800 thereabouts on the Nifty but the mood is been spoiled yesterday from a trading perspective. At higher level, I don’t think people would want to build too many positions. I think traders might actually be looking at offloading or going short at higher levels because we had too big a fall yesterday.

Once again we are getting back to square one, the mood is not great, and we are in slippery slopes for the market and we might see a bit of volatility as the day progresses; for the first half of the session an attempted pullback maybe and that too on thin volumes today.          

Asian Indices:

Markets like Hong Kong and Japan are doing pretty well; China continues to be in the doldrums, just keeps falling every day. Taiwan is flat was in the red, has recovered and Kospi is about 0.75%. So China is a problem market and Japan and Hong Kong are doing pretty okay. The Asian picture is a mixed bag today.

What does one takeaway from the global markets though seems as up-down as us?

We are in the midpoint of our trading range so is the Dow Jones index; it’s bottomed out around 11,600-11,700 pulled back to 12,600 and its come back to 12,200. So everybody sort of on pause mode and the midpoint of their trading ranges. It is like the blind leading the blind; we are all looking at each other and trying to find support and confidence but there isn’t much by way of that which is been held out by any market.

The one market which is broken down decisively is China but no other market is giving a tear away breakout which can become a poster boy and lead others out of the mess neither are the other markets breaking down. So I think we are in an inclusive zone; it doesn’t make for easy short selling but it doesn’t make for a whole lot of conviction on the way up either.

The US data; one does not know what to make of it and what the US markets will make of it because the last few sets of economic data, the US markets being pretty good. Today the ISM manufacturing data is an important piece of data to watch. But I suspect during the course of the week one will get the answer to whether the Dow has the strength to get back above 12,600 again or it will break 12,000 in the next couple of days. I don’t see this kind of flat 30-40 point move on the Dow persisting beyond a few days. I think we will get direction from the global situation during the course of the week.

Couple of recommendations from Securities and Exchange Board of india (SEBI), particularly on the futures and options side:

Yes and some of them are fine. This whole game of front running has to stop at some point. So it’s good that SEBI is making an attempt saying if you got a client order you can’t front run it by taking up a position yourself. This whole prop book business of brokerages is frankly a bit in the grey because I don’t think it is a good idea at all because if somebody gives you a USD 100 million order and you quickly do USD 10 million in your prop book because you know you are going to buy that stock and then that will go up. If there is any way to stop that by the regulator then I think all power to them let them go and stop it.

The problem is these things are good in intend but extremely difficult to implement because people in the financial markets are extremely ingenuous with their ideas. So they will stop the prop book they will do it in some other way. So stopping front running is a game, which regulators have been after since the beginning of time but it’s not being able to resolve it.

The intention is noble; I don’t know whether it can be implemented well. The other bits, which SEBI is trying to talk to brokers is to be a little bit more stringent with their client position and the financial stability and networth of their clients. But these are things, which brokers should be doing in any case themselves because it is their money and neck on the line at the end of the day. So I don’t know if regulatory pressures can be made to bear upon them to do this what they should be doing in any case.

The one thing, which I am a little ambivalent about this thing about a minimum networth’s to participate in the futures and options market. I know where SEBI is coming from because they have seen two futures led sell-offs and huge pile up of stocks futures and they want to stem that and there is some point to it. But I don’t know whether the right way to do is to say cut the small guy out of the stock futures market completely. That’s a bit like throwing their baby out with the bath water; you have put a system in place and all participants should be eligible to participate in that system.

So not very clear on whether that’s the right way to go at things by keeping a section out of the futures market though if implemented I would say it would curb volatility and that would be the desire.