After the big-big rally this is a morning of a pause, nothing wrong with it you can’t run up 5-6% everyday. After the last couple of days, which have been extremely constructive for almost all global markets including ours, most markets have just paused for the day. The US was flat, Asia is largely flattish this morning, so may be we need to rest little bit as well after the pull back of yesterday.

One day away from settlement that’s the call we need to take whether we can move up a little bit more or we need to take a day off and consolidate some of the gains posted in the last two days.

A pause will be fine just not a rewind?

A pause would be fine. Pause would be deserved as well because we have run up sharply; the index is up 6% but looking at stocks, they are up and in many cases 12-15% over the last couple of days. Not undeservedly; they have got punished very hard and therefore for a two-day bounce it has been quite spectacular.

So maybe today we rest a bit, hold out 50-100 point range on the Nifty. Even if there is a bit of red at some point, it doesn’t matter so much unless we should not give up too much of the gains; should not rewind very fast and then take it from there.

Its early days yet; the first rally has happened now we need to see whether we can actually consolidate and move higher and keep our head more importantly above the 5,000 mark which is important for sentiment to built-up somewhat. Interesting days ahead but this morning could be a bit flattish given what the rest of the world is doing.        

Asian Indices

It is flattish across Asia some of the markets were in the green but have drifted into the red. The Nikkei is down about 100-points, Korea Composite Index flattish marginally in the red, China was up in the morning but has sort of lost its gains, Taiwan is in the red and Hang Seng is absolutely flat. So we don’t have much by way of cues from the Asian markets all of them seem to be resting, after the rallies of the last couple of days 

How is the global picture?

Still murky but most important is how the market is reacting to it. The economic data was on one front, the expected economic data is another kettle of fish but the market seems to be reacting or digesting bad new pretty well and that is typically characteristic of oversold markets. Markets sell off very fast ahead of the bad news and then the bad news keeps coming in and the market refuses to fall. We see it at various junctures; it happens on the way up as well. But the refusal of the US market to buckle down despite bad news or seemingly bad news is perhaps an indication that in the near-term it is trying to put some kind of an intermediate bottom in place, it is showing resilience on the way down and one need to take the note of the fact from what’s going on with the Dow and the screen. It’s never very prudent to ignore what the screen is telling you.

Now whether it will hold out eventually in the face if the bad news continues is another matter and that’s a subject of debate but one cannot debate what one is seeing on the screen for the last couple of days or the last one week in the US market which is that stock prices not responding to bad news as eagerly as they were doing about a fortnight back and that’s important to take on board. But that’s what the screen is telling.

I think the economic data still remains quite murky there. What happened yesterday cannot be confidence inspiring even if that does not dents stock prices in the near-term; I think it just keeps the uncertainty going in the medium-term which is what happens after this intermediate rally even if it has legs in the near-term what happens after that? Consumer confidence at 5 year lows, the housing price index plummeting, the dollar slips again, commodities bounce back a bit and Goldman Sachs now says that the global credit problem could be USD 1.2 trillion nearly half of which or 40% of which is in the US USD 460 billion. If we put all of this together it just makes little uncertain about whether this intermediate rally even if it has some upside can take you to new highs or take you substantially higher.

The feeling that you get right now looking at the screen and the economic data globally speaking and I am no great global analysts or an expert is that – there is an intermediate rally on the cards because global markets got oversold but at some point the news flow will turn bad once again because the indications are coming in everyday and we will probably get another jerk or two down. So maybe we are not out of the woods for the whole summer. There will be some twists and turns and the economic data we have not probably seen the last of or the worst of but for the moment oversold markets can give a bounce and we don’t know the extent of that bounce there could easily be more steam left here, globally.

contd on pg 2...