Need spectacular Budget to reverse mkt mood, trend: Udayan

But this morning, thankfully, US cues are much better, so we hope there will be a pull back in the markets today. Dow Jones index was up 116 and the S&P 9 points.

Let’s hope that we can pull back a little bit from the damage before we get into the big event tomorrow. We will have to look at the global markets one day at a time as volatility has really picked up, with the Asian markets a bit choppy as well.

Yesterday, not just the midcaps but a lot of blue chip names started collapsing 3-4 percent. So what’s a little unnerving is that the index is beginning to breakdown after being resilient for so long.

Now it appears that even if we get a good Budget, to get back to 6000 will be quite a tall order. I don’t think the market assumes any kind of strength at all. Forget the midcap end of the market - that’s been completely crushed. I think the midcap end of the market is probably trading at 5000 or 4800 Nifty levels. There has been so much damage there.

Yesterday, the last port of call for the bulls was probably in the zone of 5780-5800 - that got taken out, making the market very vulnerable to deeper cuts. Whether that cut comes in the next day or two, or we get a pull back because in the near term, markets lost a lot of ground already.

Then, that pull back post Budget gets sold into and we go to lower levels.
The sequence is a little unclear but I think going by the reaction to the Rail Budget yesterday, I think the market will only respond very positively if there is a lot of really surprising stuff in the Budget, because the global context has started working against us.

This probably is the worst timing that you could get some risk off going in global markets, but sadly that’s how it is played out. So yes, yesterday’s fall and close well below 5800 does not port in very well and ordinarily one would have said that the market has broken down and headed to 5600 or lower levels immediately. But because of the event tomorrow, the sequence is a little uncertain as there is always a possibility of that one-jerk pullback.

But now the Budget will have to be not just steady, but spectacular, as the screen does not look too good now.

There were shades of capitulation for sure yesterday - there is no question about that. The 5820 support was holding out, but we just collapsed below that in the second half of the session. We were caught in the vortex of global volatility. It is one more of those phases where the market is probably more focused on Europe once again, rather than the US.

So, it’s a difficult situation, the way midcap damages happened over the last few days has soured sentiment to a point where it would need to not just a steady, solid Budget but a spectacular Budget now to change the mood and the trend around in our market.

The market now depends on how global markets pan out. So one day the news won't be great and you will sulk, the next morning there will be a pullback.

However, if you just map the performance of the last one week we have been seeing too many of these 100 points up days and down days in the Dow, and the 2 percent plus up days and down days in European markets as well. We were not used to seeing that over the last four-five months, so don’t know which side of this volatile phase will eventually emerge.

There is one school of thought who believes that this is just a corrective pullback and there will be a big rally again, which then might get sold into. However, these are scenarios. Volatility might easily end with the S&P heading towards that 1400 mark once again. However, there is no way of finding out right now, so instead of taking big bets just wait and watch.

So this morning there might be a bit of a relief, but you can see that Asian markets are not responding with any great vigor to the US pullback. That is because at the pit of their stomach most markets will be uncertain on where this situation is heading, as it is only after 5-6 months in the last three days that this kind of news flow and volatile mix has started emerging again.

Yesterday, not just the midcaps but a lot of blue chip names started collapsing 3-4 percent. So what’s a little unnerving is that the index is beginning to breakdown after being resilient for so long. Now it appears that even if we get a good Budget, to get back to 6000 will be quite a tall order. I don’t think the market assumes any kind of strength at all. Forget the midcap end of the market - that’s been completely crushed. I think the midcap end of the market is probably trading at 5000 or 4800 Nifty levels. There has been so much damage there.

Yesterday, the last port of call for the bulls was probably in the zone of 5780-5800 - that got taken out, so making the market very vulnerable to deeper cuts. Whether that cut comes in the next day or two, or we get a pull back because in the near term, the market lost a lot of ground already. Then, that pull back post Budget gets sold into and we go to lower levels.

The sequence is a little unclear but I think going by the reaction to the Rail Budget yesterday, I think the market will only respond very positively if there is a lot of really surprising stuff in the Budget, because the global context has started working against us. This probably is the worst timing that you could get some risk off going in global markets, but sadly that’s how it is played out.

So yes, yesterday’s fall and close well below 5800 does not port in very well and ordinarily one would have said that the market has broken down and headed to 5600 or lower levels immediately. But because of the event tomorrow, the sequence is a little uncertain as there is always a possibility of that one-jerk pullback.