Udayan Mukherjee, managing editor, CNBC-TV18, says that these are strong days on Dalal Street. Last two trading sessions have lit up the screen. We are trading at a new 2012 high this morning, nearly at 20-month high. Yesterday, the volumes were also at an all-time high.
The excitement is back on the Street and the global markets are also supportive this morning. The December series may start with gains and the market may not have to give up too much at least early in the day. Later in the day, the GDP numbers may move the market.
Below is the edited transcript of his comments on CNBC-TV18.
On 200 points on the Nifty
Nifty looks spectacular. Yesterday, after a long time, the screen felt like a bull market. Some of the largecaps were moving and providing leadership to the index. The bedrock of the broader market was also moving but most impressive were the volumes. Even though it was an expiry day, we saw nearly Rs 4 lakh crore. At one point in the afternoon between that 2 pm and 2.30 pm, when the volumes just kept on souring, one got that feeling of punch in the pit of the stomach.
There was momentum in the market yesterday and there is no question about that. Are we all at the risk of getting carried away here? Could there be roadblock starting with GDP, some hiccups from parliament and the US situation? That is entirely possible, but I think the level of participation is just beginning to pick up here.
Last couple of days, the market has shown a momentum kind of trend or a breakout. When these things happen, market sometimes, tends to go to places where you do not think we will reach in a hurry. I am keeping my fingers crossed for 6,000 sometime in December. If there is no major roadblock in the next few days, I think it may happen sooner than we expect.
On global developments
Global developments are quite supportive. Yesterday the comments, which came in from John Boehner were not very supportive, it sort of doused expectations but that one expects to see over the next four weeks. There will be lot of to and fro, lot of posturing, people will take hard stances but that is part of any bargaining process. We have seen it in our parliament as well. I do not think the market is setting too much store by that.In fact if one looks at the price action in the US, it is suggesting that some resolution will happen by December.
This is not a price action of the market, which has a fear that we are about to fall off a fiscal cliff; the currency markets are also not suggesting that. Although we should be open to some kind of negative surprise, if that happens. For now, even the global markets seem to be in good shape for a year-end rally. Surprises can always happen but I do not think that is the base case which markets are focusing on today. At least it did not appear like that yesterday.
On currency market:
It was not a spectacular pullback in currency market but ninety paise-one rupee in a single day is quite a bit. It is partly because of the flows in the last couple of days which have been very strong. There are also expectations of what might happen from New Delhi, all these things which are floating around in the environment like Goldman Sachs saying you might make 15 percent from stocks next year, so India is not in such a bad place. Moody’s is singing a slightly different tune. All of these aid the currency a little bit. So, I am not as surprised that we pulled back a bit yesterday.
On the index:
The Nifty did not even pause yesterday. It opened gap up and then kept on going. Then in the afternoon it took out that old high and closed above that. I think the market is in a serious control of the bulls right now. There could be a couple of speed breakers; one doesn’t know what the GDP number today will be, but that usually has not been a bit of a banana peel for the market and market seems to ignore it. There could be global issues and even the parliament is up and down with the Rajya Sabha vote.
At this point of time there is some serious momentum going for the market. The Nifty, after having taken out the 2012 high, I do not think there are any immediate resistances from a technical or trading point of view. So the psychological resistance is 6,000 but the real resistance now is that old high of 6,300. Although I am not suggesting we will go there immediately but if you are looking at it from a trading point of view then that is your next big port of call, that old high and whether the Nifty can journey there and take it out over the next weeks and months. In between some will talk about 5,900, somebody 6,000 but I do not think those are very meaningful resistances.
The key question is will the newsflow in December allow this momentum to flourish and whether the market will go on to some kind of a risk-off mode globally because of what is happening in terms of the US newsflow. If that doesn't happen, we will be surprised by the price performance in December because what we have seen for the last couple of days, is smacking of even greater momentum that we saw in September when the breakout happened.
On local sentiment
We have seen the first signs of some serious left-out feeling. So far people have been skeptical but the kind of price performance one has seen for the last couple of days and the volumes that one saw yesterday, tell you that the moths are getting drawn to the flame finally. Retail, usually comes in quite late and they just cannot stay out beyond a point, looking at this price performance. Every day the newspapers remind them that something good is happening in the market.
I do not think this leg of the rally is being driven by retail or local investors at all if anything they have missed out on the party and global guys are cashing in. In last two days, we have seen some serious unlocking of flows. To give a number; if we take the Foeign Insitutional Investors (FIIs) cash market purchase plus their Nifty Futures longs over the last two days, just those two which are pure indicators of their buying and the kind of momentum that they are imparting to the Nifty, it is Rs 6,300 crore in two days that is USD 1.2 billion in two sessions. The whole of October we have got a billion dollars and suddenly in two days we have got USD 1.2 billion.
It could be that in the last couple of days, the global guys have said, “maybe we have got a year-end rally in place, maybe the fiscal cliff issues will not be such a big deterrent and maybe the parliament session will give us more reasons to justify buying India. Therefore we need to park some money out here and therefore India has been such a big beneficiary.”
On mutual fund number and redemptions
I feel terribly sad about what has happened with the mutual fund throughout 2012. It is not for lack of performance because if one looks at some of the mutual fund portfolio performances, they have done quite well in beating the market. It is just complete lack of interest and distaste for equities in the local crowd.
I have been saying for a few months now that people are making a serious mistake out here by pulling out money at regular intervals and giving the mutual fund (MF) industry nothing to play around with. This will change at some point but this year has been so sad for the mutual fund sector because they have just not had the money to participate in what has been a good performing year for equities. On hindsight, the equity performance has been much better than fixed income.