Nifty may be headed towards 4800, says Udayan

CNBC-TV18's managing editor Udayan Mukherjee says, last night, the US markets were not good. “We remain very listless, grinding around that 4,900 mark with the rupee edging almost to 54 again. The sentiment is not great,” he adds.

The Nifty, he says, is probably headed towards 4,800. "It will try and form an intermediate or short-term base somewhere around that level. If it succeeds in doing that, give or take 50 points, it will try and form a range of 4,800-5,000," he adds.  

According to him, the momentum on the way down is not huge. And that, he says, is a good thing. "The turf is not great, the best you can say is that the market is not falling at an alarming pace on the way down," he asserts. 

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

It is another down day for global markets. Last night, the US was not good. We remain very listless, grinding around that 4,900 mark with the rupee edging almost to 54 again. So, the turf is not great, sentiment is not great, the best you can say is that the market is not falling at an alarming pace on the way down. So, let us see if today would be another day of a grind down like we saw yesterday.

The one thing that you can say is that the momentum on the way down is not huge at this point. Yesterday, despite inflation and a very weak European market, the market did not plunge 1-2%, which is not to suggest that the market is very strong. It may just be that maybe some of the downward pressure is getting spent, the market is getting exhausted with continuous selling and drifting down over the last many days. Maybe that is happening because we are not seeing too much by way of FII outflows.

I think the fact that over the last few days, FIIs have not been net sellers, despite a fairly shaky global environment, might just have lifted sentiment a little bit, not to say that that will spark off rallies, but people are asking themselves why should the market fall dramatically, if the guys who are sitting at the epicenter of the problem are not selling in India. So, I think that is probably protecting downsides to a certain extent. So, yes, it is a grind down market, but not a waterfall decline market like you saw yesterday, atleast one hopes so.

On global situation:

For now, there does not seem to be any major risk-off that is translating into money going out of India. That is the good news. Europe is in turmoil, the perception of risk has gone up in the world, Spanish bond yields have shot up. All of that is true, but that is not translating to what hurts us, which is FII outflows. So, for now, we are very apprehensive in India as we should be of what is going on across the world, but it is not pinching us directly in terms of the technicals.

I think the central thing now is if the global market decline continues, the S&P falls to sub-1,300, will it now start putting pressure on the Fed once again? I think we are getting to that point, not there yet, but if we lose another 50 points on the S&P, start trading in the 1,200s, I think you will find the Fed thinking about QE3 again. That might be not a durable fix, but a near-term catalyst for markets, which are oversold. So, I think that possibility should be there for every trader in his mind that if the global pressure continues, maybe a liquidity event can happen in June, which can change the game atleast for a few weeks.

On the Nifty:

The global markets are still drifting lower. It is difficult to swim against that tide. You don’t know whether the relative resilience inflows will turn over the next few days and we will have to see some selling, if this global pain continues. All things be equal, I think the market is probably headed towards 4,800, the level everybody was talking about. It will try and form an intermediate or short-term base somewhere around that level. If it succeeds in doing that, give or take 50 points, it will try and form a range of 4,800-5,000 and then see if that is holding out for the near-term. That is the best one can say.

The trend is pronounced on the way down. There is no question about that. It is just that the falls are now getting to 20-25 points a day and not those 70-80-point falls, which we were seeing last week. So, maybe the momentum has slowed a bit on the way down, some exhaustion has set in.

Typically, when that happens, the smallest of triggers can lead to a bounce back in the market. But if such a bounce back comes in and if it is a sharp one then I think traders will be waiting to pounce on its back to short the market once again. So, I think the bears might be now thinking that they need a little bit more purchase to be short on the market and not to be pressing too much or getting too aggressive on the short side below 4,900 because it has been a one way drift over the last many sessions.