Bad global cues to keep mkts choppy

Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Bears convince govt won't fall Nifty holds above 4100 ALSO READ See what other CNBC-TV18 anchors have to say Nifty BSE | NSE 30/05/12 Are Mutual Funds betting on Nifty?

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The market was mentally ready for a 12%; does the lower inflation tick make a difference?

Maybe sentimentally a little bit because you are still not hitting that 12% mark last week to this week has been a moderate fall, very modest but even so its slightest lower that is something we haven't seen for the last many weeks. So the bond yields, which have been cooling down in any case from 9.5, have come off to about 9.05 right now.

There are two ways one can argue now on inflation. The big call is given that inflation has not edged up over the last couple of weeks and bond yields have retraced somewhat and crude has come down to about USD 125/bbl. Will the Reserve Bank of India  (RBI) on Tuesday say maybe I do not press the trigger this time around because after all there could be some signs of easing off out there for firstly inflation and secondly for the primary cause of inflation. The other way round is for them to say its still extremely elevated, monsoons have been jumpy and I don't want to take a chance because by the time I come back next easily the monsoon impact could have filtered in through higher prices, food prices and inflation would have gone up again and so I don't want to take a chance with inflation at 12%, I need to press a head with monetary tightening.

It's a tough call, two weeks back it was taken for a given by the equity markets that rates would go up, CRR or repo, or both. Now it seems like there is maybe a 60-40% chance of rates going up 40% being that because of inflation and crude, maybe there is an outside chance that the RBI does not move. That is a critical trigger for the market whether its 11.89% or its 12.1% frankly I don't think there is a huge difference for the equity markets per se. But if the RBI pauses then I think it might be more by way of near-term relief for a market, which is trying to claw up.

What does one watch for on the Nifty?

We will retrace a bit, maybe sub 4,400 go back to those 4,350 kind of levels for the moment but I think the market will not go down very easily right now because we have had a meaningful run up. I think in the last couple of days you have seen signs of participation; more importantly the bears will be probably little skittish after the kind of move up that they have seen in the market. So you may not see with the first 50-70 point fall, which comes in, a heavy scale shorting beginning once again. I think that will probably wait for the market to get back to those 4,200 kinds of levels. The bears will bring out their claws once again if the Nifty does get to 4,200 and maybe slips below that. That I think will be an indication of weakness enough for the bears to come back into play. 

For now you are still running a premium on Nifty Futures which means shorts are more or less been cleaned out, the put-call ratio is very high at 1.48. So right now for the moment for the last few days the bulls have had control of the market and that will not change maybe even with another 50-100 points cut on the Nifty. If over the next few days-the uncertainty is crude, if crude bounces back then you might see a little bit more by way of a dent in the Nifty. But for the moment the traders will go with the theory of probably buy on the decline and try and trade it up a little bit higher from hereon. 4,300-4,350 for the moment seems like it will hold out unless there is fresh bad news, which is coming our way.