Apr 16, 2013 11:37 AM IST | Source: CNBC-TV18

Global cues negative; mkt eyes March inflation data

Global cues are not great today. While the US market was flat, Asian markets touch red today morning led by China. A lot of Chinese data will be announced today.

Global cues are not great today. While the US market was flat, Asian markets touch red today morning led by China. A lot of Chinese data will be announced today.

Also Read: Morning cues: Global mkts in red; Nifty to slide further?

It is an important day for Indian market as well. March WPI inflation data will be announced today. Also, after the Infosys debacle there is a lot going for the market today in terms of cues to watch.

Many key earnings are stacked during the course of the week, so, today is an interesting day for the market after the big blow it received on Friday, said Udayan Mukherjee, managing editor, CNBC-TV18.

Below is the verbatim transcript of his interview on the channel

Q: It does not look like things will turn right this morning, is it because of the global cues or because of how bad Friday was?

A: In the near term, the picture still looks quite murky though we did quite well on Friday to hold on to 5500. It was just the kind of day where the market's back might have been broken by Infosys. I wouldn't have been surprised to see the Sensex down 500 points on Friday. However, the rest of the market held out, the midcap index was flat, there was no great panic apart from the IT index. Maybe it was one of those cases where the market was like the last few quarters, it was trying to do something that was different than what Infosys was telling it to do.

We have seen resilience on bad Infosys days in previous quarters as well, maybe it was just that or could be something else in the last few sessions after a long time there have been a few things that are positive from a medium-term perspective for India that are coming to the fore. I say this with caution because in the near term the picture still looks quite murky, but the way gold has been collapsing for the last few days, the way crude is unable to get back to USD 104-105 per barrel and struggling around just above the USD 100 barrel. Some medium-term things could be falling into place and that does not mean that the market starts rallying or stops its fall immediately.

There is more pain in the near term but in the medium term a few good things or few small stars are aligning themselves for India. Maybe some of the longer term investors are taking cognizance of that and have started deploying money selectively in some pockets in the market using very bad sessions. I think some good things are happening that one should not lose sight of, given the screen has been looking so bearish over the last few weeks. Near-term seems like there is more pain ahead, the IT index did not help the Nifty but three-six months out there might be a few good things to talk about India from a relative perspective which has not been the case for the last couple of quarters at least.

Q: Is this is an important week for us in terms of earnings and also a test for the index?

A: It is. The bears would have hoped that 5500 gets broken down on Friday because they had a lot of ingredients to break it down with not just the 20 percent fall on Infosys, but it still held out. In doing that, it probably reflected a bit of reluctance to go below that level in the near term conclusively. So, you could see another pounding of 5480-5500 today and then we’ll see if that level holds out.

Sometimes the markets will fall without reason and sometimes it will digest lot of bad news and still hold on to a level. This is because consensus has emerged that this level is going to be taken out in the near term and we are heading to 5200 immediately. Due to this 5200 chorus over the last few days, the Nifty might frustrate a little in the near term by not obliging with that consensus immediately by hanging in around 5500. If there is some positive news may be from wholesale price index (WPI) inflation which is benign leading to expectations that we get a rate cut on May 3 or if Tata Consultancy Services (TCS) delivers something which is quite different from Infosys. Reliance Industries comes tomorrow, so any of these factors, gold coming off, could lead the market to just attempt a little bit of an upmove or at least not break 5500 conclusively in the near term.

The market’s shape is quite weak. We are talking about whether a near term support will hold out or not. Too many combinations of recent events makes one to believe that the market will eventually fall in the near term. Whether that is a buying opportunity for medium term investors or not is still unknown because some things are on the mend. Notably in the commodities complex, so that even if we form a bottom in May or October as bottoms tend to be formed in our market then after that slowly things may start moving higher.
It is a complicated prediction for this year because you have seen that the political rhetoric has also started picking up so by the time we wait through another four months, maybe we will have a different kind of clarity on the political front as well. Take it one month at a time. Just in the near term looking at Friday’s screen, it may not be prudent to be too aggressive on the short side till the market gives you a clear signal that this support has been taken out.

Q: We have begun to see outflows, even the domestic sold on Friday, but anecdotal evidence seems to suggest that maybe some of the longer term money is still committed to the market, what do you think?

A: One level of buying is happening around 5500, so a lot of people are saying okay we have come down quite a bit, this is the first landing. We buy some here and then if the market falls some more, we will buy some more of the same stocks at a slightly lower price point because nothing is given in the market. You got to take a staggered approach at some point and there are people in the market who believe that this level will not be violated meaningfully. 100 points here or there is always possible but not very meaningful. So there is a little bit of buying.

The domestic institutional sell number that came on Friday is a function of Infosys being cleaned out as well because some DIIs may have sold Infosys too on that day. The quantity was so large that it might have led to a sell figure for both FIIs and DIIs.

Today and tomorrow could be important, because today we have the WPI number and the market is clutching at straws out here. One straw is a possible rate cut in early part of May that market may want to latch on to. The other one is the Reliance number tomorrow and the TCS number on Thursday. These are large cap names, so the market is like a drowning swimmer, it is clutching at straws here and there are a few straws to clutch at during the course of this week. If they hold out may be 5500 hold out for sometime but if they turn out to be very empty straws then the market will sink once again.

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