RBI may fire few more silver bullets at the rupee: Udayan

CNBC-TV18’s managing editor Udayan Mukherjee says that after yesterday’s disappointing session, an impetus was given by the RBI but the market just couldn’t sustain the rally. “The fact is if the Nifty can’t hold above 5000, it is not a good news.”

Every time we have attempted an up move in the midst of a downtrend, the bears get even more emboldened and they showed it yesterday. Mukherjee doesn’t know whether the Nifty will still grind in a bit of a trading range and remain as volatile as yesterday. That can happen for a few days. If there was any more evidence required that we are firmly entrenched in a downtrend we got that yesterday. Also for the broader market it has been not good.

For now, the screen doesn’t look good and there are signs that we might remain in this downtrend for a few more days.

Worries over the Rupee

It was almost like a token pull back for the rupee. Mukherjee hoped at least 50-60 paise should have happened on the rupee but the market seems to be testing out the central bank. The market senses that the RBI is desperate to salvage a broken currency The RBI may not be pleased that the rupee is still hovering around the 53.40 mark but the central bank still has a few more silver bullets it may use to get the rupee fired up soon.

The Indian rupee trimmed some of its earlier gains against the dollar on Thursday, though it remained well above the session lows after the RBI said it would require exporters to convert 50% of their existing foreign currency holdings into rupees (with inputs from Reuters). It appreciated by 22 paise to 53.60 a dollar after hitting a high around 53.20.

Mukherjee doesn't know about today but he feels more steps are coming because it will not concede defeat on the currency quite so easily. Whether they are able to pull it back to the 51-52 range remains to be seen but over the next few days we will probably hold a range of maybe 52.50-53.80 kind of level, which is not a great level given that Reserve Bank actually has made the supply of dollars into the market far easier over the next fortnight at least.

Where is the Index Headed?

The market is listless and is just unable to keep its head above 5000. Yesterday was the second or third closing below that 5000 level. The market is getting weaker and weaker with every passing day that it spends below 5000. There are two scenarios that the market still grinds and becomes volatile in a range because at 4950, chartists will tell you it is a reasonably important technical level. It may pause here for a bit with that support and just be volatile like it was yesterday.

If 4950 breaks then we are staring at a 4800 minimum straight away. So it’s a downward trending market and the pace of acceleration on the way down is what you need to question at this point in time. Something dramatic has to change in the environment to pick the Nifty up beyond 5100. 5100 now is a roof over the market’s head, max 5200 unless the Reserve Bank does something which is dramatic and completely unexpected.

Mukherjee doesn’t see any positive global cues as there are no signs of that, so we may remain in a downward sloping trajectory. Also with every passing day, the pace at which some of the influential midcaps are coming off is worrying the street a lot.

IIP Numbers to be a No Show

The government will be announcing the industrial output numbers for March today. The market does not put too much stock into these numbers because of how volatile it is. However, a CNBC-TV18 poll sees it come in at 1.5% versus 4.1% tick in the month of February.

He doesn’t expect the numbers to move the bond market much because the bond market has a sense of what the RBI has said and is set to do and changes in the IIP numbers will probably not swing it too much. He finds that the 10-year yield anchor is pretty much around that 8.5-8.6% level. The IIP has lost its relevance a little bit.

As an unreliable indicator, he doesn’t expect the number to be going. It will be lucky to get a positive number even if it is 1% because the PMI was weak, core numbers were weak. He doesn’t see how suddenly the IIP number will be a good one. The IIP will merely indorse what the market knows already and to that extent, it may be a short lived kind of reaction. “The more important data is clearly what's happening on the trade deficit and what the RBI plans to do to arrest the fall of the rupee. I think the stock market is far more focused on that now,” he adds.