Global mkts recover; Nifty to consolidate in 5400 range

But, it doesn’t look like the market would make much headway today. The Nifty might consolidate above 5,400 as we digest huge amount of political noise generated in the system yet again.

Yesterday the expectations of a QE3 (Quantitative easing) have gone up quite considerably. That is why US markets recovered from the lows of the day and it seems quite likely. It is just a matter of when not if that QE3 will be presented. This has been the expectation from many quarters as well.

Even if you look at the European markets I know there is a lot of uncertainty around Greece now and it is looking murkier with every passing day, but it is not reflected in the euro at all. The euro is steadily marching towards 1.26. I don’t think that market is reflecting any great nervousness at all. It seems also very squarely focused on that liquidity event of the ECB commencing buying of bonds.

The European and the US market investors are squarely focused on liquidity right now. That being the case it does not appear how a major correction will be triggered unless some event were to present itself.

Is QE3 good for us? In the short-term we’ll go up with most markets, but as we have seen with the previous QEs, it creates a lot of medium term problems for us and crude is already nudging USD 116 per barrel even before QE3. There are two ways to read it.

But just in the near term, global and local markets remain much focused on liquidity and that risk on behavior is seen in prices and the way it held out yesterday.

Our markets have been quite resilient, I was telling yesterday that the market was shrugging off the political tensions for the moment, but the pitch is rising with every passing day. Yesterday, the kind of comments one heard from parliament seems very hawkish and it seems quite unlikely to everyone now that there will be anything done in this parliament session. It could be another wash-out.

So you are presented with the same situation, the outcome is always the same from a Parliament session. The reason has changed, sometimes it is 2G or Coalgate, but finally the outcome is pretty much the same.

Not too much will be transacted in this session of Parliament. But more than that, the talk of BJP MPs quitting could lead to some sense of instability, which the market may struggle to ignore completely.

It has done that right now because it is focused on other things, but if this continues to be the pitch then even post September 7 when the Parliament session comes to an end, the ability to do something meaningful on the policy front might be quite restricted. The situation is not just unsupportive; it is down right hostile in New Delhi.