It is an important day for the markets globally and locally. Today evening Ben Bernanke will speak on what he thinks of quantitative easing (QE)3, will it continue or will it be wound down.
This is one key global event to watch out for. Apart from that, locally, it is an important day of trade because bellwethers in infrastructure and media sectors like Larsen and Toubro (L&T) and Zee will report earnings, said CNBC-TV18's managing editor, Udayan Mukherjee.
He also sees a pullback and the chances of the Nifty slipping into a lower range of 6,000-6,200 and digesting and consolidating recent gains is quite high.
Below is the transcript of Udayan Mukherjee's analysis on CNBC-TV18
There is also Bank of Japan policy decision coming in today. The way yesterday the US market behaved it looks like to be quite relaxed right now. There is a mild edge of apprehension on what might come through from the Fed and the minutes of the Fed, which will get released.
However, I think most people are coming around to the view that Bernanke won’t do anything to roil market sentiment. He is a market cheerleader and it is very unlikely that he will do something which will completely startled the markets. The language will be very minutely torn apart to see if there is any hint even of QE winding down over the next few months. So, let’s see what the market makes of it because he will not say anything hawkish explicitly, but the markets takeaway might lie between the lines of what he says today.
But anyway global markets seem quite relaxed, as I said Europe was fine, US closed up and Asia is okay this morning. The Dollar Index has not gone berserk overnight. The only collapse which is happening right now is in the silver market and that’s become a talking point amongst traders. even here silver is collapsing completely, but otherwise, I think we should come out of the evening event today quite okay.
The markets have had a tremendous rally, above 6200. Even the weaker hands were starting to sing a 6800 kind of tune. New highs were taken for granted and the market needed to shake off some of the weaker hands with a little bit of a jerk. Last couple of days the markets looked quite fatigued, even yesterday many of the large cap names came off a little bit. However for now you still want to think that what the screen is doing is just a routine pull back.
Now if the global news turns adverse over the next 24 hours or the Nifty starts getting down to sub 6000 levels and keeps closing there that could signal the start of something more ominous for the market. However right now after such a powerful rally despite the sluggishness in the profit taking of the last couple of days in many clusters including the Bank Nifty, we just have to read it as a pullback to the big rally and not the start of a vicious downtrend at least yet. Facts may turn out to be different in a few days time but we are not quite there yet.
So, I don't think the bears can after looking at the screen take very aggressive short positions at this point. You can take tactical shorts which might have been in play even yesterday but those are probing trades. One can scalp a little bit because for now it looks like a counter trend kind of move which is playing out in the market. However, we need to be vigilant because important events are panning out over the next few days.
Also the Foreign Institutional Investor (FII) data will not give much ammunition to the bears at this point. Even yesterday when the market was coming off, FIIs were actually on the long side on the Nifty Futures, which generally is a bit of a wind vain for which side the sentiment is moving. There too I don't think they are very aggressively bearish at all, in fact quite the contrary. So, all put together for now we just read it as a correction and a pull back and then keep watching the market screen to figure out if it is something deeper or bigger than that.
So, let’s get today’s event out of the way and we will get a clearer picture of what the global scene is like over the next few days. Post today we will get a sense of what the next 10-day picture for global markets might look like. Having said that in the near-term there are some headwinds for the Nifty, which is like everyday. There are three or four of these offer for sale (OFSs) or institutional placement programmes (IPPs), which are coming about and they are quietly milking away a couple of thousand crore on the margin. Some of it is or quite a bit is foreign institutional investor (FII) money in the high quality names.
So, I think this will continue for the next 10 days and that sort of caps any kind of liquidity-driven momentum for the market. The secondary market is probably not getting a lot of money at this point, some of it is clearly going into these block deals which are happening.
Also, the rupee is baffling a lot of people that stock markets have moved up. The Dollar Index actually in the last couple of days has kept its head under control. However, due to demand one has seen the rupee go down to all the way to 55.40 – that on the margin is beginning to worry people.
So, I think for now it is possible that the Nifty actually after this pullback forms some kind of a trading range. Now that range could be 6,000-6,200, in which case the market would simply have gone sideways after pulling back a bit and digested recent gains. However, I think what we need to figure out is whether this kind of depreciating trend of the rupee continues through the next week and whether we get some kind of jolts from the global market. In this case this kind of a mild pullback and consolidation range theory will have to be revisited. However, for now it looks like a pullback and the chances of the Nifty slipping into a lower range of 6,000-6,200 and digesting and consolidating recent gains is quite high.