The market remains in a bit of a rut locally and globally, but lots of individual stock action is going in. Today market will be watching National Thermal Power Corporation (NTPC) offer for sale (OFS) and the Alok Industries rights issue.
Lots of interesting results are lined up today like VIP, Bombay Dyeing, Aurobindo Pharma etc. So, one should focus on those individual names rather than looking at the Nifty because it is just not doing anything over the last few sessions, said. Udayan Mukherjee, managing editor, CNBC-TV18.
Below is the verbatim transcript of analysis
Europe is a problem and the noise level is picking up in Europe since last couple of days and that is emerging as a bit of a risk once again. One can’t say for sure that this is a phase of many weeks of European stress, but it is being talked about a lot.
There is a debate about the impact of a strong Euro is raging in the West. However, one could see that even yesterday despite the recovery in the United States (US) markets the European markets slipped from the highs of the day and closed quite weak. That remains a problem pocket.
The US market was down as well, but it pulled back from the lows of the day because of good earnings out there. From a global risk point of view, if one is mapping the possibility or the threat of a risk-off it is more likely to come out of the European region rather than the US.
The European markets are trading at two-month lows. However, two days will not usher risk-off in a global environment with this flush with so much liquidity. Things will need to get worse whether they will or not through February, one will find out. For now some disturbing signs are picking up in Europe, which the market needs to be cognizant of.
It is a capital raising season here and there have seen some of these phases in the past where a lot of supply hits the market suddenly and most of the interest is focused on getting those issues done. Even from global investors or large institutional investors the focus shifts from chasing a market, which has lost momentum to probably getting some allocation in, high-quality paper, which is coming in at reasonable prices. It is supply season in the market right now and therefore the Nifty is stuck, not going anywhere.
The best one can say for this market is that it is not assuming a lot of momentum on the downside as well, which is a bit of a relief because if it had broken down conclusively some of this money raising would have had to recoil as well. We started off by saying it is better to focus on individual stocks, but even there we are getting reactions of 5-7 percent every day depending on which way the newsflow is coming.
That’s a better pocket to be looking at because in individual pockets there are opportunities emerging because stocks are reacting very sharply to results or newsflow. There are selling opportunities, which are coming about as well because of very sharp rallies. One should keep his eye on individual stocks. For the Nifty trader or the Bank Nifty trader we are perilously close to the lower end of the trading range, but it is still not conclusive enough to go out and trade aggressively.
The Nifty seems to be caught in a tight spot. It is just not moving and is frustrating a lot of people. There are two scenarios that can play out. One is that this is the process of a really shallow correction and it more like a time consolidation for the index or for the large-caps because of the global liquidity scenario. The market over the last 3 or 4 weeks has corrected quite a bit under the Nifty and that qualifies as a correction, which is not reflecting in the index.
It may continue like this for another week or 10 days and then before the budget you see this correction ending and the market starting a process of an upmove once again. It may play out like that because pre-budget, there is some excitement, which usually happens and this time around even more so. There is a case for being excited. We will find out whether that excitement is borne through or not.
The other scenario is the not so bullish scenario, which is that the market senses that there is global trouble brewing. Given that we have had many weeks of a continuous run up, this eventually will lead to a trigger of a bigger correction in global market. In the face of that markets do not want to climb to a higher place compounded by all the liquidity and supply of issues that we have been talking about for the last few days and therefore this consolidation will end in a breakdown and the market will adjust at a lower price point.
There is just no way of knowing looking at the screen or the price action of the last few days, which scenario will play out. One can assign a 50 percent probability to each of these. We could get a consolidation and then a move up once again into the budget and through it or globally something will go wrong and markets will correct, budget not withstanding and we will see levels like atleast 5,700 in the month of February. Just not sure, which one will play around. Maybe the next 50 points will be crucial in determining that for a trader, but the screen is not telling me anything on which way this cookie will crumble.
Foreign Institutional Investors (FII) seem to be moving at odds between the Futures market and the cash. Too many deals are happening, so today’s Rs 1,130 crore figure may not include anything from the Axis QIP, but everyday there are some meaningful size offerings and when the pay-in is happening and what number is included in the FII numbers which is getting reported because these seem like fairly large numbers and they seem at variance with what they are doing on the Futures market.
One would have to assume that of the large numbers which have come in from the FIIs in the cash market over the last 6 or 7 sessions – a fair chunk of it would have gone in through some of these issuances which are coming through. So, net of that how much money has come into the secondary market is a little difficult to fathom. One thing is clear that whatever is coming into the secondary market is more than offset by selling which has picked up in the domestic institutional front.
So, FIIs have taken a view that this market is not ready to climb to a significantly higher place in the near-term. One can see that in the Nifty Futures action. You can also see it in the kind of writing of the 6,100 call which has picked up over the last few days. People genuinely believe that 6,100 for now will be difficult to take out and writing that call and trading below that might be a more prudent course of action.