Mkts optimistic; 5-6% rally likely

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IFCI , RNRL , TTML , JP Hydro , those kinds of stocks, and they have moved quite a bit yesterday, and 5 crore stocks got added in open interest. We are coming to a phase where traders are also getting emboldened and saying we have killed 5,000, there is more upside, so lets latch on to our 5 darlings and trade them up another 10%-15%-20%. The internals are suggesting that people are sniffing a little more upside in the market but that's internals and that is historical information for whatever little its worth.

 

How is the market looking for the future?

 

Don't know; I am quite confused because the screen is suggesting that it could be another 5-6% left in this rally at least but that could change on a dime; some bad inflation data and some bad earnings.

 

I think the markets still quite edgy. It's not like everybody is heaving a sigh of relief and saying, "we killed it; now straight away 6,000 next on the Nifty." That's not the mood? The mood is okay we have clawed back, we are not in danger of breaking 4,500 again and can we trade this rally a bit longer? That seems to be general sentiment and the answer to that from most traders seems to be "maybe we can get back to those pre-budget levels of 5,300-5,400 on the Nifty." I think that is the limit of the upside that most people are trading for at least for the first half of the May series which is what has lead to such a big rollover in the Nifty.

 

We are at 50:50 now another 300 odd points; is it possible 5-6-7%?  I would reckon yes; if the global markets do not collapse from here and we could get to probably more than 17,000-17,500 on the Sensex if the global markets don't turn because the local sentiment is supportive of the market edging up a bit higher.

 

But fingers crossed completely; we have had good 12%-13% rally from the lows. It  is entirely possible that getting in if one is going long closer to the higher end of the trading band and one does not want to be holding the baby if the tide turns suddenly against you.

 

One needs to be a bit cautious about going long from hereon because one has got 12-13% already in the price behind belt. So there is an added element of risk in the market which one needs to be cognisant about. But I do not know where it will go, I am completely confused.

 

How does one marry the two, the way global equity markets have been moving and this almost scary surge in commodities?

The thing about global markets is that every morning one asks the question whether the worst over and are we out of the woods and the heart says yes because the screen is looking good and it is ignoring every bit of bad news like crude at USD 120/bbl no problem, bad housing date no problem, high inflation no problem and poor earnings no problem. It is looking like the screen is very brave at this point in time but the head is still not saying yes.

If one just looks at what is going around us; earnings weakening and will probably weaken more in the US, we still haven't hit recession yet, who knows what's going on in China, crude is at USD 120/bbl and global inflation is an issue in many parts of the world, so I think we are skating fast but its on thin ice and don't know when ice will give in and it's a tough call but the equity markets have been remarkably resilient and I hope the equity market is right in the sense that it is telling you the bad news is in the price and we are ready to move up from here, the worst is in place and if that pans out I will be happy but the head is still not saying that thumping yes that we are out of the woods.

 

So one should keep an eye on others things which are happening, some very key earnings in the US are falling off indicating a key distress and the dollar is weakening once again. I hope the foreign exchange market is only weakening because of expected Fed rate cuts and I hope it's not the case that the foreign exchange market and the equity markets in the US have different takes on what the US economy will move like in the foreseeable future. If that is the case then one must be careful because sometimes a foreign exchange market going by past history, get it a bit better than the equity markets