Mar 14, 2013, 07.09 PM | Source: CNBC-TV18
It was a set back for our markets on Wednesday and it seemed to have lost its way a bit after last week's powerful rally.
Udayan Mukherjee (more)
Consulting Editor, CNBC-TV18 |
Below is the verbatim transcript of Udayan Mukherjee’s comments
Although the last couple of days have not been great for our market, one doesn’t know whether this is just a pullback to the rally or U-turn has already happened. That is something which will get confirmed over the next couple of days.
The global markets have paused and US remains the strongest market that is not falling but it is also stalling a bit. Even the currency market is not indicating great things. The march of the dollar index to 83 and the fact that the euro keeps coming down every other day, below that 1.3 level is not very comforting for people who are watching risk-on. Therefore, the Asian market sentiments over the last couple of days, particularly in markets with which we have some correlation like Hong Kong, are not doing very well. So, one tends to get an iffy feeling at the pit of your stomach.
Generally, I do not think markets are looking great but the one unpredictable thing is whether suddenly another leg of liquidity globally will get unleashed, and you will see an event like last week. The chances of that kind of a powerful rally are low but not zero. For a trader, it is a confusing time but the screen has not looked very good or comforting.
Last week, we saw some inflows and then they seemed to peter out once again. However, what happens with emerging markets is not necessarily what happens with US market. The US market is appearing stronger. Even the Japanese market is appearing stronger among Asian markets. So, relatively speaking US is probably the big magnet which is sort of preventing a bigger correction in this part of the world but it is not providing enough momentum by way of liquidity to drive stock prices higher.
One did see a gush of money coming in at around 5700 Nifty, but the moment we move back to 5900, that money seems to take its hands off the table because valuations don’t look that comforting after the 4-5 percent pull back rally. I guess that is the money’s way of saying that if you get deep draw downs, and valuations go down to very comfortable levels in blue chips, you will see some money walking in but that money will not be there when Nifty is at 6000 plus because you don’t have comfort for valuations.
When that 5700 Nifty money walks into largecaps, one will see attendant short covering in the beaten down midcaps but that is not seeing follow up buying because the local crowd is just completely absent from the market.
For the last couple of days the FII figures have not looked great. Since the government is pushing a lot of paper which is not great quality, I guess domestic institutions will now need to be on the sell side for the next few days to cough up the money to subscribe to those issues. The one caveat is that you still don’t know for sure whether global liquidity will turn against us. For the last few weeks the signs have not been great, last week’s gush of flows not withstanding.
Yesterday, I heard Bill Gross of Pacific Investment Management Company (PIMCO) say that they are still getting a lot of money into equity exchange-traded funds ( ETF ). One knows that large part of that money is probably going into the US but even if a small amount of money is thrown into this part of the world will keep the market from correcting too significantly. So, liquidity is still unpredictable and you don’t know whether it can continue to be benign for some time longer. If that happens, corrections will be shallow but without liquidity, the market and the screen is not looking good.