Nifty around vulnerable levels: Udayan

Udayan Mukherjee, managing editor of CNBC TV18 says, the close below 5,000 changes things a little bit. “I don’t know whether we can try and still work with this 4,900-5,000 as a base for now or more downsides are opening up as the May series unfolds. We remain around very vulnerable levels for the index,” he adds.

Barring crude, he says, there is nothing to cheer about. "Crude is holding around USD 113 per barrel and not quite collapsed after the initial fall. But Europe is a bit of a mess," he asserts. 

According to him, it is important for the Nifty to hold the 5,000 level. "The more time we spend below the 5,000 level, the weaker the market gets," he adds.

Below is the edited transcript of his comments on CNBC-TV18. Also watch the accompanying video.

Global markets are shaky once again. Yesterday was very bad for our market. We have not woken up to great cues from global markets again. US just about held out, but Asia is not in a good place this morning. So, it looks like a start below 5,000 on the Nifty, after breaking it yesterday on closing basis, beckons this morning.

On the Nifty:

Yesterday was such a decisive blow. The close below 5,000 changes things a little bit. We are in a bad market. The problem is that one by one most of the sectors are beginning to come off. Earlier if FMCG, IT and pharmaceuticals were sort of supporting the index, yesterday IT started breaking down again. So, now you wonder what will hold the Nifty up because banking and infrastructure are showing you tremendous momentum on the way down. IT started correcting sharply yesterday. Reliance is tatuering at around Rs 700.

FMCG is playing a bit of a savior and that too ITC is showing some chinks over the last few days. So, I think it is becoming a difficult time for the Nifty now to try and foray into those rallies of 100-200 points. It looks quite vulnerable though, it’s been a fairly one sided kind of fall now, barring that GAAR day rally. So, I don’t know whether we can try and still work with this 4,900-5,000 as a base for now or more downsides are opening up as the May series unfolds.

Barring crude, there is nothing to cheer about. That too crude is holding around USD 113 per barrel and not quite collapsed after the initial fall. But Europe is a bit of a mess. Greece is an evolving situation now. Everyday you are getting fairly adverse news flow and you can sense that that’s come back as a central risk for global markets once again.

We were not talking so much about Europe till about 10 days back, the markets seem to have gone with a view that Europe sort of disappeared as a central risk, but it’s come back.

French elections might have been digested, but Greece is simmering still and you could see the nervousness in most of the European markets and how they panned out yesterday. So, yes, global markets are not great, therefore flows are not good. I think for now global markets remain in a risk off mode. And that’s not giving us any kind of sucker as we remain around very vulnerable levels for the index out here on our own.

May has not started very well. We are sub-5,000. That optically exerts a lot of pressure. The more time we spend below the 5,000 level, the weaker the market gets. That is why the GAAR clarification must have raised hopes because we went below 5,000 and bounced back immediately 5,100. So, it almost seemed like it might have been a false breakdown, but again we got slammed yesterday below 5,000.

I think if we do spend a couple of days below the 5,000 level, have a couple of closings below 5,000 then the market intrinsically will become weaker because then people will set their sides for lower levels like 4,700-4,800 over the next few weeks. So, I think we are in shaky territory.

The hope this morning was that global markets will stabilise and we’ll swiftly bounce back above 5,000 and on hindsight it would look like just a one-two day kind of breach below that. But if we do start trading around 4,980-4,950, I think traders will slowly start lowering their targets for the Nifty. And then climbing back more importantly above 5,200 kind of levels become that much more challenging. The market would then have drifted down indeed into a much lower trading range. So, the markets only hope is that something changes quite quickly in Europe over the next couple of days, we get a bit of a lift off from here and we don’t stare down the barrel at 4,700-4,800 kind of levels again.