Mkts in midst of an uptrend

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Global cues are not so good. Markets are in the midst of an uptrend. Support from external factors still remains a question but markets are likely to go up.

 

 

A Fantastic start to the August series but is it good to go further?

That is the tricky question and a tricky part. Hopefully there is more because the market keeps coming down and then bouncing back. So the last week or ten days, I think it has shown quite a bit of inclination to move slightly higher. We closed above 4,400 on the Nifty , which was quite encouraging. So technically it seems that the screen is saying that it wants to go up right now.

Whether the external factors will support it is the big question; hopefully global markets will not fall so much or too much from here and hopefully crude will also ease off because if those factors fall into line then I think the chances of the Nifty going up to 4,500-4,600 at least seem quite bright for the moment. But it also depends on what kind of cues we get because those are the only big triggers right now. We have got most of the other triggers out of the way, earnings, policy, politics etc. So I think it will depend to a large extent on global factors but it looks like the screen is suggesting that the market wants to go up a bit more from here. 

Asian Indices:

Asia is not a pretty picture; it's not selling off but it's weak. Kospi is the market which has sold off; down about 2.6%, Hang Seng and Nikkei are not comfortable about 1.25% down apiece and the other markets are down as well. So they have picked up the negative cues from the US and from the crude oil market. 

Global situation circumspect:

Yes it is a bit volatile in the US, you do not know what to make of it but there is a Fed meeting coming up on August 5, which is tomorrow. But I do not think there will be any rate action there. Even the Fed futures market is indicating only a 7% probability of a rate hike, so those cues will come and go and that will probably not be very material.

The bigger issue is what is going on in the crude oil market and the kind of news flow that we keep hearing now from between Israel and Iran is not great. It is a fairly uncomfortable situation which is why the crude oil market, which cooled down to USD 121/bbl is seeming a bit edgy once again and that is probably the most important cue for us in the near-term in terms of sentiment because the market is trying to move up a little bit what you certainly do not need at this point is crude going to USD 135/bbl once again. That might stop the rally on its track, so one needs to monitor the geopolitics of the situation.

Having said all of that one can clearly see that there is a general feeling that India is being oversold relative to other global markets, which is why in July India was the best performing market across the region. The Sensex was up about 6.6% and that is a whole lot better than any market managed to strike out in the month of July. I think it is the first month in 2008 also that India outperformed its global peers. So maybe in the near-term there is a technical sense at least at the market, which has got terribly oversold, if global cues are terrible then India might just actually pull back a little bit more than some of the other markets because it fell much more to begin with.

I think that is important to keep in perspective because so far in the first six months of the year India has consistently underperformed most other global markets with the exception of China. If that changes around in the near-term then we could have that technical rally probably fleshing out a little bit more but for that you need generally global markets to stabilize. If all markets keep falling then India will not go up but it might fall less than the others.

On Nifty:

This morning we will pegged back 40-50 points easily because of the global cues but as one saw on Friday; Friday was an interesting day because we started the day about 200-300 points down on the Sensex and at the end of the day 300 points higher. So intra-day swing of 500-600 points probably told that market is reluctant to go down just in the near-term. We are probably still in the midst of that pullback which started from 3,800. So this morning from 4,400 can we go back to 4,350-4,380 levels; certainly possible? From there I think the market will try and stabilise a bit. I do not know whether today will be one more of those days where we start 50 points lower on the Nifty and end 50-60 points higher on the Nifty. But the market is showing reluctance to go down from here.

The big question is - we went up last time to 4,500-4,550; do we get there in this run, do we get higher or do we get pegged back from somewhere around these levels and make a journey back to 4,100-4,200 levels. For the moment it still seems like a Nifty, which is ranged between 4,200-4,500 broadly speaking; once we get to 4,500 levels we have to take stock whether the market has enough momentum to push it higher and go to those levels which the chartists are being talking about of 4,600-4,700.     

Monsoons in the month of July:

Fifteen days  back all of us were worried that the monsoons were are not good this time around and the picture seems to have eased off in the last 10 days. Most of the Southern and Central parts of the country have got quite a bit of rain. The only thing is how much of damage to the cropped area has happened already because it is not only the quantity of rain matters but when it comes and how it gets spread out is also important.

In oil seeds, in cotton we did see some damage to the cropped area happening about 15 days back. Now the rains have happened but have they come in time to prevent the damage to some of those crops and ensure that the crops are good this time around, that is something which is slightly more difficult to ascertain but its good news and no question that the monsoons have improved

There is a report from Centre for Monitoring Indian Economy (CMIE) this morning that the oil seed prices will remain quite high for the next 3-4-5 months. We need inflation to come down and therefore oil seed prices and cotton prices not to go up. So it s good news what has happened last ten days and we just need this to continue and some confirmation from the agriculturists that  maybe some of the crops will not get dented to badly.