Global markets in mild corrective phase: Udayan

Generally, the mood is of some sluggishness and correction in global markets, but having corrected quite a bit yesterday, today the hope will be that the Nifty stabilizes somewhat around that 5,650 mark, said Udayan Mukherjee, managing editor, CNBC-TV18.

It’s a fourth day of a correction for the S&P 500. Things have been little edgy around the global markets for the last few days, but the last three-four days have been bad quite continuously and even corrections do not move in a straight line.

We can sense that this morning Asia is trying to work with a little bit of a rebound so this correction eventually might drag us a bit lower, but since we have fallen continuously for the last four days there is a possibility of a pullback and then the correction might start once again. There have been lots of reasons for the last couple of days; the latest has been that S&P downgrade of Spain and the way the euro dollar has been moving as well.

We are in a mild risk off phase, there is no getting away from that, but what has happened in the US for the last couple of days is that some focus is shifted to the earnings calendar as well because people are just focused on liquidity and macro. Some micro focus has come back and earnings have not started off as people would have wanted it to. That’s wholesome relevance for our market as well because we are also just beginning to get into earnings over the next few days.

In the US, it’s not quite worked very well for the market so far. I hope the situation won’t be similar for India as we get into earnings over the next few days. But, overall it’s a mild corrective phase so far. The S&P is down to 1,430 now. It can lose another 30-50 points without people ringing the alarm bells. Anything more than that, the more it gets into the 1,300, people will start to get quite worried.

The market reacted badly yesterday, but frankly what S&P said yesterday is a very bullish thing because this government has acted I think under pressure from the rating agencies. I don’t think the government, without the fear of a real downgrade would have come and done what it did in September because that was really looming large over the government. The S&P now coming and saying as you said hold your horses, don’t get carried away, all this feel good media is all fine, but you need to do a lot of serious work on the fiscal otherwise our threat of cutting your rating still remains on the table. It is an excellent which has happened because you cannot let the government relax right now and bask in the glory of what it’s done.

It needs to do a lot of serious work on getting the fiscal deficit down to atleast the 5.1%. Over the next year to have a concrete road plan roadmap to get it down much lower and that’s what is germane for the rating agency not the champagne that’s being popped because of FDI retail and the noise around that because that doesn’t matter so much.

The two or three things which the government will now be pressurized to keep its foot on the pedal with is the fiscal roadmap, the national investment board because the S&P will be watching whether the government can re-stroke the investment cycle and the NIB is a crucial plank of that.