Asian Indices:

Asia is taking the morning off today. The Nikkei is down 1.3%, Kospi is down 1.2%, China opened down but has recovered which is good news and the Hang Seng is down nearly 1%. So more than 1% cut in the most of Asia, with the exception of China.

How is it looking both for the markets and the internals after yesterday?

It’s completely inconclusive and that is the game which is playing out. Both the bulls and bears don’t know what’s going on. Every time it runs to 4,600 in a hurry, you see bears covering up some of their positions, booking profits and the longs getting initiated and every time it dashes back to 4,900 the longs get skittish, they book profits and some fresh shorts get initiated once again. We have crunched down to a 350 point range on the Nifty right now but within that range no camp knows which way we are going. Every body is just content taking that 100 points off the Nifty whenever they get to their extremities and there is zero conviction on life below 4,600 or life above 4,900 for the Nifty and that is exactly the story which is playing out from a trading perspective.

The market is left to near-term traders and which is why we are seeing this to and fro in volumes. For a market to break out one would need to see some stronger hands coming in and either buying or selling. If there is wave of selling we will crash below 4,600 and if there is wave of buying we can get above 4,900. I think the news flow would need to change as well. Right now the bad news for the moment seems to be in the price, atleast that is what market is suggesting. There is not too much by way of good news which is coming in but there are lots of events stacked up in the next fortnight or so. There are monetary policy outcomes coming out in the next 15-16 days, we have got whole earnings season which will tell us whether the news is good or bad  and you will get a handle about whether the commodity markets are about to cool off by the end of this month.

In the answer to all these outcomes would lie the answer to whether the market would head back above 4,900 or head below 4,600. By the end of April the picture would be quite clear but for the moment we are resigned to trading in a very narrow range, 5-6% range for the Nifty. We went there on Friday; we bounced back and if over the next couple of days we get to the top end of the range, people would want to take some profits off again.

If there are that many domestic issues even if we play for a stable global market, can it do a whole lot to break this range?

The thing about global markets right now is that the price action is very positive but the news flow is not. So one do not know what to make of it; your heart tells you to go with the price action and say, “global markets are showing that they do not want to correct in the near-term and they want to consolidated move further up. The screen is looking far better across the world and its doing in India but the news flow is still not improving.

I think we are now crossing that phase where people have stopped or stopping their rejoicing after the Bear Stearns bailout and now focusing on maybe some of the fundamental news which is coming in, the economic news continues to be bad, the first of the non-financial earnings which have began to come in, ALCOA being case in point has not look very good and crude despite everybody crying for a correction that market has got back to USD 109/bbl that’s up 8% in the last five days crude. I think that’s very important, we keep watching the S&P and the Dow but I think we need to watch what’s going on with the commodity complex more importantly now because if our markets or global markets need to move against the inflation fears and commodities as an asset class needs to cool down more than the Dow moving up at bit because our eyes are more focused on the inflation than getting help from the Dow and the Nasdaq now.

The commodities, some of the non-financial earnings, the economic data is not looking comforting but the price action is fairly robust across global markets. So one is torn between playing for a technical rally in global markets or just retracing and keeping it light given the kind of fundamentals news flow which is coming in. so who knows who will win over but at least for the moment we keep our hopes alive for a bit of a pullback in global markets and that may help us.

The good thing of course is China; the fact that it showing signs of a relief rally. China and India have been fairly coupled in the fall, so if China manages to get out of the woods at least in the near-term with a relief rally that raises the odds for us to stabilise as well.