The morning seems fine on a global level. Barack Obama's annual State of the Union address seems to have spurred the expectations of an all-time high for the US markets. That is the backdrop with which we negotiate our market apart from a lot of key earnings that come in today.
There was some relief and not unexpectedly, because there has been a one way slide in the market. Maybe the Nifty has not lost too much ground but just a couple of 100 points from its stop. However, it has been quite relentless. So, after eight-nine days of almost continuous slide, the market would have given you some sign of stability or a pullback because maybe it would have exhausted itself on the way down a little bit. That is pretty much what happened yesterday.
However, one should not read too much into that pullback because it was not accompanied by very good market breadth and volumes were not exceptional. So, we can give the market a little bit more elbow room on the way up, maybe another 30-40 points. I don’t think we are probably out of the woods yet. We need to see far more reconstruction particularly in the midcaps and smallcaps.
The good thing is that the US market continues to chug along very nicely towards an all time peak and as long as that happens, you can see underperformance in some markets. However, collapses in any market with the US pushing near all time highs is an unlikely scenario. So, I think the force of gravity is on the way up now from the global perspective and liquidity and that is what is keeping us afloat despite our intrinsic weakness which has crept into the screen.
The market saw a small recovery yesterday. However, I don’t think one can read too much into 20 points this way or that. Global markets are so supportive now and it is that kind of phase this week that most global investors atleast in this part of the region are not active. So, there are much more muted FII flows. It is a ranging market for this week with maybe a mild positive bias for the next couple of days. It seems like a pullback to the correction that we have had already and that too in a few select largecap names.
The market could see something like 5950-6000 kind of levels. Anything beyond the 6000 level looks like bit of a stretch unless something changes on the horizon.
It didn't seem that the pre-Budget rally had started. I am expecting a few result disappointments as well, like was seen yesterday in many of the metal companies like JSPL, SAIL, etc. That will takeaway a little bit of sheen from the market sentiment. So, I don’t think we are in a very gung-ho mood in the market as such. The best course of action could be flat lining it now for the next week or so and then see if there is any bit of pre-Budget build up that we can put in out here. However, there maybe a couple of days of respite to this correction and then it depends on how global events pan out.