Apr 18, 2013, 09.25 AM IST
It is a difficult global morning as the US market sold off overnight but Asia is resilient and the SGX Nifty is resilient as well. Maybe it is one of those mornings where you worry about what is happening in the West, but do not respond to it directly.
Today is likely to be a diffcult day given weak global markets as the US market sold off overnight, but both Asia and SGX Nifty are resilient as well. It may be one of those days where the worry is about what is happening in the West, but the market does not respond to it directly.
Our market saw this coming and that’s why it gave up gains in the middle of the day on Wednesday. Today is not such a big day in terms of earnings, says Udayan Mukherjee, managing editor, CNBC-TV18.
Below is the verbatim transcript of his interview on the channel
A: Nervous and volatile. I think a storm is brewing. I do not know when it will break but it is brewing.
There are some dangerous red signals blowing around. One, the DAX has collapsed and it is the strongest European market and is not Cyprus or Greece. It is Germany. The DAX has been completely collapsing, now gone into negative for the year. That should send shivers down someone who is looking at global economic growth for this year.
Also, the news out of China is very disturbing because China is opaque. It is not like India where the bad news is out in the open and more so, with so much media bout.
A: Yes, suddenly an auditor comes and says, you know China has a massive debt problem and is on the verge of collapse. You do not know what is going on in that country. Commodities are telling you a disturbing story whether it is responding to Europe or to China, you do not know. We have been celebrating the last couple of days, the demise of commodities but sometimes these are symptoms and the cause is somewhere else, which we figure out later. I don’t have a great feeling regarding where this global situation is headed.
It is true that some of these factors build a case for India outperforming other markets in a relative sense. But if all markets start selling off, as we have seen in the past, then there is no point holding on to one small boat and saying, our current account deficit (CAD) is going to go down. Nobody cares beyond a point. It is like saying the Nifty falls a thousand points but one small stock will go up because its fundamentals are good.
Everything falls with the market. That is the worry for the global markets right now, whether we are getting into some kind of growth funk and what we have seen for the last few days, extreme volatility, gold, crude, Germany, China is somehow portending this or some bigger storm which is brewing out there. I do not know whether it will come to pass in the next week or next month, but the disturbing signs are flashing on the screen. We feel good about the fact that commodities come down, but it pays to be cautious in this kind of a scenario.
Q: If someone says that markets especially the US, is headed for a spring break because they have been running so hard, so long and that will impact not just us, but also this whole flows equation, will it be difficult if some of these key markets start struggling?
A: We have not had a global risk-off for many weeks now. All that we had is churning of money between markets, so, the money is there. Some moving into the US, some into Japan, it has deserted emerging markets for a bit, but has gone into some other equity markets.
Here we are discussing a general risk where people say, we do not have growth in the world. We are barking up the wrong tree. That is a different kind of freeze and does not usually spare any market. I am not suggesting that has unfolded starting last night, but it is simmering. Something in the global screen is looking a little askew and therefore, we need to be careful about what we are doing.
Flows change everyday. We have seen some dribs and drabs of flows because commodities have corrected and a lot of short covering has taken place in the last couple of days. So that is understandable given that commodities have fallen and people have started looking at India once again, but here we are discussing a slightly bigger phenomenon.
Q: On Wednesday we rallied 2 percent and so it was alright to consolidate. Will the next couple of days be important to prove whether the market has more mettle in it or not?
A: Yes, for now we are okay. We have just been hovering around 5,700 so there is a couple of 100 points of a cushion to get down to 5,500. I think a breakdown possibility immediately does not look very high. Also India has just come back on the radar of investors in the last two-three sessions.
Unless massive risk-off starts immediately, then it is a different ballgame. But if this is more or less orderly kind of correction, the chances are reasonable that India outperforms in this leg of the correction, which is that the Nifty falls less than other markets or at least even sometimes goes up when other markets are down, this will carry on for a few days. But if all hell breaks loose over the next few sessions and even if commodities completely collapse, then we should brace ourselves for a big downturn.
Q: You should know the for the last five years orderly correction is an oxymoron, every morning you wake up, you get blind-sighted by some blast in some city, it all comes together, what is your opinion on that?
A: There are corrections and sometimes they are like waterfalls and sometimes they are shallower affairs. So in a shallow correction, India does better than many markets. In a waterfall, we get whacked.
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