Global mkts to be in consolidation phase this week

Yesterday, we saw more of the same across the global screen; little bit of a pause, some consolidation maybe even some introspection.  Also, volumes have dropped off a little bit globally. Everybody seems to be now in that big decision mode on whether the market has legs to carry on from here or whether it needs to take stock once again.

Liquidity is still winning in global markets. You can sense that. There was a time in the afternoon yesterday early evening when it looked like global markets might correct. Europe was down about a percentage point, Dow had opened up weak, but then liquidity came in and that small dip got swallowed very easily.

We were back into the green in the US, even European markets closed well off the lows of the day. So the general feeling in global markets is that you are running into a bit of resistance, but the wall of liquidity is so strong that corrections are very short-lived and inevitably you come back.

We can see the same reflected in all the risk parameters like the volatility indices also in the currency market where things are pretty much moving in one direction. It is picking up crude but that is the unfortunate part of any kind of liquidity phase. So global markets might spent this week in consolidation tussle where maybe market may not run away because it gets this feeling that fundamentally it is running ahead of itself, but liquidity will not let it correct too significantly. That will make for some volatility within a tight range.

Our market is going through an important phase and an important resistance level. So it is inevitable that you will see some kind of consolidation happening around here. I don’t think the screen over the last couple of days has suggested that the rally has come to an end. The only thing is that the market has got very narrow. Sometimes, markets get narrow when during crossover periods because it is an important hump and only a few largecap blue-chips will lead it and the rest will correct.

Yesterday, the bad thing was that midcaps did not do well. Large parts of midcaps like the infrastructure stocks corrected significantly. So this loss of breadth is a little bit of a worry. Also, we have seen some loss of momentum over the last couple of days. It is not like 5,350-5,400 taken out very easily.

Right now a couple of largecap names like Lever, Infosys yesterday held the Nifty up, day before it was another set of stocks, but the lack of breadth and momentum, will worry short-term traders a little bit. That does not mean that the rally is over, it may just be a pause.

Maybe today or tomorrow we take off once again which is quite likely given the kind of money that we have in the market. For now, the leadership is concentrated in just a few stocks. It is almost like it is a tough match and only a couple of the big guys are batting for you and the rest are just watching from the corner.

I don’t know how we would pan out today because sometimes we expect or extrapolate this phase of consolidation and say yesterday was ranging and today will be rangebound as well and suddenly the market takes off 100 points. These days are just liquidity calls. If today Rs 1,500 crore of money gets into the market then the market will take off and close at the highs. So, we may be clearing 5,400. An intraday call is very difficult to take.

It is disappointing that yesterday we got a lot of money in but the market could not quite clear 5,350. It has run into a little bit of resistance out here. As we were discussing earlier that narrowness of the market, a fact that lot of stocks are not doing well might be making short-term traders a little cautious.