Market is watching Infosys and HDFC earnings: Udayan

HDFC Bank would also announce results, index of industrial production (IIP) numbers lined-up in middle of the day. We had a very good pullback and a surprising one too for a lot of people; I imagine the way the Nifty snapped back to 5,700. Sustainability of yesterday’s pullback depends to a certain part to Infosys, said Udayan Mukherjee, managing editor, CNBC-TV18:

We have been talking that the markets may not oblige with a swift correction to 5,500 as a lot of people have been talking about. Even if that were to happen, periodically you will see the bears getting trapped on the wrong side because the market momentum is now on the way up, the bulls have charge of the market, one could see that there is a lot of pent-up buying, which is happening at every fall.

The surprising thing yesterday for a lot of people is the weak start and then a rally, which included a lot of the midcaps and some stocks on which people were getting increasingly bearish like BHEL, DLF, etc bounced back very smartly. Even public sector banks, which had started a corrective groove but the ferocity with which they have pulled back yesterday, may have surprised a few people.

This is going to be the way of the market - corrections and then surprising rallies, but I do not think from yesterday’s rally you can infer with any certainty that the corrective phase is completely over because sometimes markets correct for 4-5 days, give you pullbacks and then correct again. But one can sense that this is not a very weak market and periodically you will get these flashes of strength that you saw yesterday.

The western markets had corrected for 4-5 days and Europe gave a nice 1-1.5 percent rally, but you can sense that the US market is tiring out a little bit so they start off strong and then they fizzle out by the end of the day despite good jobless claims data yesterday. Global markets are still in consolidating mood may be with a mild hint of correction. From an India perspective, the disappointment is that crude is moving higher to USD 116 at a time when we are all hoping for outperformance from this market compared to other global peers.

It did that yesterday but hopefully crude will not fly off to USD 120 because that will take off a lot of the feel good that has happened after the fuel price hikes last month. Fingers crossed on that front, but otherwise let’s track the earnings triggers and see if the Nifty can get back to 5,800 where it slipped from.

The Nifty had a good showing, a very strong showing yesterday. It was a huge intraday pullback. The ferocity of the pullback would have surprised a few people. But that should only be expected in a market, which has been trending so nicely and in which you got a 150 point kind of Nifty dip and then may be some shorts had pilled up and we just got that respite, which a lot of people needed and the bears had to run for cover.

Does Yesterday’s pullback mean that the short-term correction is over above 5600 and the Nifty will not go below that level? Or is it just a pullback in the context of an overall correction, which is that markets have come off for four days and then you get a pullback and then the correction might resume once again. We need to watch the evidence of the next couple of days to be sure that on whether this correction has come to an end and the Nifty can find its way back up to those 5,820 plus kind of levels once again. If that happens, it will be a great outcome but we are just entering earning season, so there are many interesting things to negotiate over the next few days, Infosys, Reliance, many of the other big earnings which are stacked up next week and some of them are not expected to be great.

The Nifty will have to basically deal with some very lackluster earnings to get to those 5,800 levels. I am not suggesting it may not do that, it may choose to do that, but it is a very eventful kind of fortnight ahead of us with lots of news flow so you cannot take that call just on the basis of yesterday’s rally that the correction has come to an end.

There might still be a lot left. Yesterday might have served as a warning to the bears who would have got active over the last few days that they might get wrong footed very easily because of the strength of flows and the basic underlying uptrend that the market is currently in.

I don’t think the IIP data will move the needle of the market at all. It is completely irrelevant data. I know we make a big deal of it and today it could be one percent plus core data has been better. It does not matter whether IIP is more than one percent or more than 1.5 percent or minus 1.5 percent, because the data is unreliable and nobody takes it very seriously.

From a macro point of view, the market knows that inflation is sticky and will remain sticky for the next few weeks or maybe months. But all attention from a macro perspective is focused now on what happens to the Reserve Bank of India’s (RBI) decision on October 30.

While inflation may not give the RBI elbow room to move, whether the government’s action in September is something that the RBI will find supportive enough to go ahead with a rate cut, that is the judgement call which the Central Bank has to take. Whether the market will get another leg up or a reason to move higher at the end of October or not depends on that.

I do not think these data points which are quite well-known to the market and most economic participants will move the needle too significantly. It is bordering on whether the RBI wants to do it or does not want to do it. It is a fine call on which way they will decide at the end of the month.