Jun 18, 2013, 09.46 AM IST
Markets have rallied ahead of the Fed meeting and to that extent it is sort of going in with some expectations from Ben Bernanke believes Udayan Mukherjee, managing editor, CNBC-TV18.
The Indian equity market is likely to react to the important Fed meeting that will start today but chairman, Ben Bernanke is likely to speak only late Wednesday night. Hence, the market will probably respond only on Thursday morning to it believes Udayan Mukherjee, managing editor, CNBC-TV18.
The Reserve Bank of India (RBI) monetary policy that was announced on Monday did not make too much of a difference to the market. "The pullback continued yesterday, so we seem to be in a nice short-term groove for now but global markets will hold sway over which way we move over the next couple of sessions," adds Udayan.
Below is the edited transcript of Mukherjee's analysis of the market.
On global markets
There is a sense of optimism in some parts of global equity screen. Stock markets have done quite well over the last couple of days in the US, though it is just a bit worried about the way the bond yield hardened yesterday. That is not a great sign but that could just be the bond market’s way of putting a little bit of last minute pressure on the Fed Chief. However, it had cooled down to 2.13 and went back up to almost 2.20 yesterday. So, that was a little nerve-wracking.
Everybody is now pretty much resigned to the fact or aligned to the fact that the Fed will soothe the market’s nerves. There is an expectation of something quite dovish and therefore, that is what the markets have priced in and prepared for over the last couple of days.
That is going to be very important for all emerging market currencies, even equities. Markets have rallied ahead of the event and to that extent it is sort of going in with some expectations from Ben Bernanke. Hopefully, there will be no disappointment but a part of whatever good news has to come in is probably slowly getting built into the price even before the Bernanke’s speech tomorrow night.
Nifty’s pullback was on expected lines as we had a big fall and it was quite conceivable and likely that the markets ahead of the Fed meeting will pullback somewhat and that has exactly what has happened. What is a little baffling is that foreign institutional investors (FIIs) are still not on the buy side and not even in a rush apparently to cover up some of the short positions, which were built over the last one week or so.
I think that is a strange phenomenon because if FIIs were feeling very jittery about the fact or the bears were feeling jittery about the fact that the Fed will speak in very dovish tones and talk about quantitative easing (QE) extension, then they should have covered up their shorts by now. Maybe they will do over the next couple of days but we haven’t seen too much by way of short covering yet.
Infact yesterday, there was selling on the Nifty futures from the FIIs which is at variance with what the stock market has done and the kind of expectations that one is seeing built up around us. I do not know, which the right way to read it is. In the next two days before the Fed speech, there will be some short covering, which takes higher in the near-term or the FIIs are confident that there will not be a meaningful rally post the event. The market are already priced in whatever little had to happen and maybe post the event one will see it come off once again.
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