Aug 08, 2013, 09.36 AM IST
One just needs to see if that is a sign of selling exhaustion which might be creeping in after such a relentless decline in the market, says CNBC-TV18’s managing editor Udayan Mukherjee.
Today is the last day of a truncated week and yesterday the markets just held a bit of a trading range above the 5500 level.
We are still in uncertain times. The US market has been a bit wobbly in the last couple of days and the rupee is still keeping its head below 61 to the dollar, which is not good news, says CNBC-TV18’s managing editor Udayan Mukherjee.
The best one can say is that the pace of the slide has slowed down a bit over the last couple of days. One just needs to see if that is a sign of selling exhaustion which might be creeping in after such a relentless decline in the market, he added.
Below is the edited transcript of Udayan Mukherjee's market analysis on CNBC-TV18
There are signs of some selling exhaustion in the broader market but in the blue chip names there is some selling creeping in over the last couple of days and that fits in with the foreign institutional investors (FIIs) data, which has been coming as well. Wednesday was a Rs 350 crore sell figure from FIIs that will make the market a bit nervous because throughout this fall there has not been very significant selling from FIIs in the cash market in fact not any selling at all.
In the last two-three sessions there has been some selling in the Nifty futures. If you aggregate those numbers, they will be close to Rs 1,500-2,000 crore and in cash market we saw some selling. So shorting is picking up from FIIs and selective selling in blue chip names is beginning to pick up. It is a cause of worry not just for the stock market but also for the foreign exchange market, which seem to be pulling back to below 61/USD yesterday but then slipped again because of being slightly overwrought with the FII data. So this presents a bit of a risk to the market.
In any case there is a debate raging in the West about a lot of commentators including Fed governors have come in and said that tapering will start sooner than later. While that has not had a very major impact on the US bond yield or indeed the dollar immediately, we are seeing some slightly somber mood across global equity markets. So yes, maybe in the broader market, there are some signs of selling fatigue but you just need to be a bit more careful about the blue chips out here.
The key thing to watch over the next few days is whether the Nifty underperforms the midcap index as it did yesterday and that is a dangerous sign because so far the broader market has been leading the fall. In the last couple of days we have seen some exhaustion there. Infact many of the beaten down clusters like real estate, even banking have given some of the pullbacks from terribly beaten down levels. However, now it seems that some selling is turning to the Nifty and I hope it is not beginning a leg down compared to the broader market or the Nifty.
So ITC has come back to Rs 320, HDFC has very quietly come back to Rs 730 level and most disturbingly for the index IT is showing signs of fatigue. Yesterday HCL Technologies fell 4 percent, TCS came off a couple of percentage points and that has been single handedly responsible for keeping the index higher. This may be the sign that now global investors are booking profits in some of the outperforming IT names continuing their selling in the consumers and are getting even more bearish on the financials.
Since yesterday, there have been lots of downgrades coming in the financials. In fact churning out, throwing out stocks from portfolios, getting underweight on the banking space. Morgan Stanley, Credit Suisse have all done that. This happens after a 20-25 percent fall in most of the bank stocks.
The market has already marked down the financials and now the downgrades are beginning to come in. This does not appear to be the end of the pain for the financial sector. So a combination of these sectors might yet put the Nifty under some kind of stress contrary to the popular belief that the broader market will continue to fall but the Nifty will hold in one place because of support from some of these sectors.
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