Nifty's move to 5K will be key thing to watch

Asian Indices:

Asia is having a off morning, most markets are in red though there is no great sell off just mildly subdued. The Hang Seng is down about 260 points. China is down 3% and it remains a problem market.

Since the past few days, the screen has actually been looking good?

It has and you have to respect what the screen is telling you. One can talk about triggers and this and that but the market goes through phases and feels a certain way and in the last couple of weeks the market’s been dealing with all the bad news which has been thrown at it quite well, that’s no guarantee as they saw past performance is no indicator of future returns.

We don’t know how long this will last, but we have been in a bit of an uptrend since the last 4-5 weeks aided by global events, now the next 10 days is quite critical, the next couple of days we will go with Futures and Options, maybe whatever little bit of a short covering and that’s been a powerful propellant  of this market in many sectors and the Nifty as well because generally we have come out of a phase of extreme skepticism and pessimism.

So make no mistake, whatever Philip you have seen, 10%-12% from the lows as had a large stimulus from short covering, in the next couple of days, the short coverings will be pretty much done with, the expiry, whatever little has to be done will be done and then you have another week of earnings and then you are done with earnings season as well and by that time you will be done with the monetary policy and you will know what lies from there.

The key question is how long this global pull back last?- As long as we are in a fairly be-nign kind of a global equity market scenario this pull back might have legs, so small disappointments here and there, not withstanding, the near term uptrend is still on. Where it ends we don’t know but for the moment for the last few weeks the market is showing you near-term strength but its very difficult to say whether this rally takes us only till here, 5,000-5,100 or takes us back to the pre-budget levels of 5,300-5,400 or even higher, that none of us know and we are all guessing, but for the moment the markets are not showing you too much weakness.

On earnings:

There has to be constant support from earnings to take the market higher because we have come to one crossroads now, we are not at 4,500 anymore, we are at 5,000 plus and so the market is off the lows and for it to move on from here 3 things need to be in place atleast for the near-term.

One  we should not get a shock from the monetary policy on the 29 th and if there is a repo move it will dent back markets and it will not be very easy for the market to shrug off an interest rate or a policy interest rate hike. So that should not happen. In the last seven days you need a little more support, we don’t need earnings like what happened yesterday although they were not bad earnings but nothing that will do much for the upside of the market atleast in the near-term from the two biggies Reliance and TCS. We need better earnings and hopefully a few earnings surprises from the market to keep it going and more importantly we need this global set up to be in place.

So earnings are important. The market may shrug off one or two disappointments but over the next few days if we get more disappointments, the market may struggle to continue with its uptrend.