Jul 16, 2013, 12.11 AM | Source: CNBC-TV18

Don't be fooled by rallies, mkt weak on poor macros: Udayan

In his analysis of the market Udayan Mukherjee, managing editor, CNBC-TV18 says the Nifty is above 6000 but the big question is whether we can carry on this good work in the face of increasingly bad news on the macro front.

Nifty may open flat today despite Infosys giving lift to the market by its better-than-expected results, says Udayan Mukherjee, managing editor, CNBC-TV18.

In his analysis of the market Mukherjee says the Nifty is above 6000 but the big question is whether we can carry on this good work in the face of increasingly bad news on the macro front.

“A lot of companies’ Q1 earnings are expected, so let’s hope they will be as good as the first couple that we have seen last week,” he adds.

Below is the edited transcript of Mukherjee’s interview to CNBC-TV18.

On global markets

The global markets have pulled back quite a bit after Fed chairman Ben Bernanke’s reassurance that the monetary stimulus tapering is not going to happen soon, but some things in the global space are still not looking very comfortable. One may have expected the US bond yield to come below 2.5 that is still lingering around 2.6, of the highs but still hanging in there, crude is still uncomfortably high for us at almost USD 109.

People were expecting bad data from China that came at 7.5 percent unlike expectations of 7.2 percent. That has not happened but it is not comfortable data and the industrial data frankly is quite bad in China. It is a wishy-washy kind of global environment again. I think after the pullback, people will once again sit back and take note of whether the markets need to rally even further from what they have done from last week. So, it is not as bad as it was 10-days back, but one needs to keep in mind that some amount of recalibration has happened already.

On Nifty rallying

This recalibration is the only thing which has changed. That is the reason we are not at 5700 and at 6000 and people are breathing a little bit more easily on the foreign flows front. Yes, outflows have stopped for the moment but I think the market needs to pause now because we have had a 300-points plus rally. The inflation data on Friday was not comforting at all. Yes, we have had a couple of good results but as we wait deeper into the earnings season we will see far more warts from the earning season.

The macro is a reminder that things are still very difficult for India. One may occasionally have these bouts of pessimism and optimism because of the way foreign institutional investor (FII) flows are moving, because that is pretty much the one thing which drives the market. However, the underlying is still quite weak and that does not go away with rallies or busts in the markets. So, I think it is still a very challenging kind of trough for the market and therefore at 6000 plus, one would tend to think that the market needs to pause here.

A part of the market never participated in Friday’s rally. It was just a few stocks. Infosys did its bit on Friday. So, a few largecap names are attracting some global capital and that is keeping the Nifty up. But I think the broader market is pretty much reflecting what the underlying economic reality is, because one might see a handful of high quality names still delivering good earnings but with the kind of macro that we are working with now, it is very difficult for the larger basket of companies to deliver any kind of growth. I think the market is doing the right thing, when it gets flows, it goes into 10-high quality names, the Nifty optically looks high, but the broader market is still exhibiting a lot of stress and pain and that is why it is just not participating.

The market did cover a lot of ground and it has got to do of course with the FII numbers which have turned positive for the last three days. So, it has been a good run but now the market can go up another 100-150 points easily if the FII buying continues. However, fundamentally, one should start getting a little cautious out here because beyond a point,  there is no reason for the market to move up significantly from here. The macros are still quite shaky.

1 2
READ MORE ON  Udayan, Nifty, PE, earnings, results


video of the day

Like Bank Nifty; mkt has strong support at 7700: PhillipCap

Explore Moneycontrol

Copyright © e-Eighteen.com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express written permission of moneycontrol.com is prohibited.