Thursday did not sizzle with momentum, but still the Nifty got very close to 5,600, but one has to see whether this is a more durable pullback. It is an important day for the market with the earnings season kicking off today with IT major Infosys.
Also read: Infosys Q4 profit seen down 3% QoQ, sales likely up 4%
It has to be seen if the first of the few earnings, will egg the Nifty forward towards and beyond the 200 day moving average. Global markets are okay but now local factors assume some importance with the micro and macro data (February IIP data) lined up for the day, said Udayan Mukherjee, managing editor, CNBC-TV18.
Thursday did not look table thumping though because the market got narrow once again and that is never a good sign. So, it could be just a temporary breather but we did not have great breadth in the market yesterday. Midcaps did not outperform, handful of largecap names did quite well, for example- Infosys, Tata Motors, DLF, ICICI Bank. So, in a sense the largecap leadership was good but the breadth was not there.
Today is an important day because we get a lot of macro data and Infosys’ comes out with its earnings. It is a combination of what would be important in determining whether this rally continues for another 100-150 points on the Nifty or if it going to run into headwinds immediately now. Yesterday was the first sign of tiredness, which crept in.
It is an interesting day for the market for sure. It is crucially poised after two days of an attempted upmove, but I think today, also being the weekly close, it might be a bit of a decider on whether this rally or pullback has legs going into next week or it will be terminated abruptly.
It is difficult to decide what’s next for the market because there is a lot of newsflow around the opening time. So, I guess, today’s market reaction or start will be determined to some extent by what the numbers from Infosys turn out to be like. The IT sector has had a fairly influential role in holding the market up over the last few weeks. So, Infosys assumes an importance and then the macro numbers, the IIP numbers which may not be strong, followed by the consumer price index (CPI) number, which also comes in. So, I think today the market will see a lot of newsflow, which vitiates a clean trading environment and a call that you can take for weekly.
It is important for the market because we are trading just about 40 points below the 200- day moving average (DMA). That broke down a few days back. If today, because of Infosys, the Nifty can break past its 200 DMA again, I think some semblance of confidence may return. We will probably head a little higher in the near-term. So, because of where the market is perched, the number assumes an importance.
If the market does not like what it sees and the IT sector starts coming off today, then after yesterday’s wishy-washy kind of an upmove, confidence in the upmove might easily get sapped and the market might start reverting and going back to the 5,500 kind of levels once again. So, the timing of the newsflow is also quite crucial but one way or the other, by the end of today’s session, I think there is a reasonable chance that traders will get a handle on whether they should be chasing this pullback going into next week or it has come to a premature end once again like pullbacks often do and the downside might have reasserted itself.
Ethanol pricing will finally be finalised today and seen in conjunction with levy and the release mechanism that happened few days back, I think a lot of positive things are in the sugar sector. One may argue that Rs 34 is close to market price, so what’s the big deal in that? But atleast on the volume front, there is some assurance so the off take will probably be better.
Sugar prices don’t stay in one place. Sometimes they do come off quite a bit below Rs 34 as well, so in those times, maybe this price on ethanol will also help on the margin. So, this morning, there will be a positive move. These are temporary relieves and they will help to a certain extent but these are not game changers for the sector. Nothing should convince one more than the price action for the sugar companies post the levy and the release mechanism going away.
Stocks rallied for a day and they are probably in many cases lower than where they were when the news came in. Sugar is a difficult sector to make money out of because of government regulation and million problems that they operate within. It’s a low grade commodity sector and periodically one will see excitement. So in my eyes, this is not a big wealth creation sector. You would probably see trading excitement for a day or two on the back of this as well. Will stocks get re-rated? I doubt it very much.