Mkts may not react to bailout news

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The markets will be rangebound and may probably shift down to a lower range of  around 3900-4100 today. Indian markets are unlikely to react to the bailout as the markets have not been reacting to news from the US. We may fall in-line with the rest of Asia.

 

Here is a verbatim transcript of Udayan's comments on CNBC TV18. Also see the accompanying video.

 

We come back after a day's break but the picture is not quiet what one would have been expected to see from the US markets . Yes, the deal looks like it will pass through, the bailout package but the Dow Jones Index was down 350-points, there is one more go-ahead which is required but the market is not convinced and nearly a 100-point cut in the Nasdaq as well.

 

The good news of course is that Asia is not reacting as violently to it just like last time. So, Asia is down but not quite out this morning but that's the backdrop; the US sell-off deal almost through, Asia is quiet and we are trading the last day of our week as well which has been a truncated one but quite a volatile one.

 

It is almost like yes bailout, but so what?

 

Sort of and I think a lot of people who might have kept positions open on Wednesday hoping that once this market against this sense that the bailout will come through, you will have at least a bit of a pop up in the US but the Dow is very close to, where it was on the panic low which was hit after the deal got rejected. So two days after that big pull back rally we are pretty much back to square one and that's not very comforting. Of course the market is pretty much signaling what we have been talking about and that is bailout package done but so what? Does it change things materially for the medium-term? - Perhaps not.

 

For our markets, I think we are in a fairly range bound kind of situation now. The range is shifted lower and within that we will probably grind around. So perhaps a boring kind of a session, a little bit of a nick in the morning and then hold a negative kind of a range for a bit, but don't expect anything special on the last trading day today.

 

Asian Indices:

 

 A couple of Asian markets are shut like China and Korea. The others which are open are okay; Singapore is down 2%, Hang Seng is down 2%. One should remember that this is a reaction to a big sell off on the US markets. Taiwan has actually recovered some of its losses; Japan has to a certain extent. So they are down but not quite out this morning. 

 

On the bailout and its impact:

 

I don't think we will react as much to the US fall because that is typically what we have not been doing, as in the US sells out 3-4% quite regularly now-a-days but Asia and India does not do that. So perhaps we will be spared that big a cut. We will probably fall in line with the rest of Asia, may be loose 0.5-1% this morning and then amble around there but violent reactions like that may not happen.

 

I think the market there is trying to put pressure on the regulators and the Congressmen - it is almost like a warning; a sell off before the final vote happens that if you do not pass it, then heaven help you because the stock market is going to take another big tumble. I think it is the market's way of probably adding a little bit of pressure on the policy makers there. I think there will be more that the US policy makers will have to throw at the market, this bailout package will have to pass and then later in the month you have to see rate cuts from the Fed as well, because the market is clearly signaling that this is not enough to bail it out of trouble.

 

We had a big fall then a smart recovery and then in the next couple of days we have pretty much given back much of those gains and gone back to virtually the levels which existed when the panic sell off happened that is probably the markets way of saying, "We have priced in the bailout package but materially life does not change for us."

 

There are many other things which are very problematic out there and perhaps they are as important if not more, than this bailout which has consumed investor and media attention over the last 48-72 hours. The way London Inter-Bank Offered Rate (LIBOR) shooting up everyday is hugely problematic out there for companies. If you just look at the macro data, the jobless claims data is just worsening, home prices continue to fall, and none of this is good. Even if we get that bailout package through, is it a magic wand after which you say from Monday onwards everything is hunky dory? - No.

 

The market is probably just reacting in a correct way, which is the relief and the despondency reactions are knee jerk but after that they are pretty much holding a downward drift out there in the US, which probably is the right way to be because the problems are just humungous.

 

contd on pg 2..