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Jun 26, 2012, 09.19 AM IST
Udayan Mukherjee, managing editor, CNBC-TV18 says, between now and expiry, the Nifty may grind in the trading range of 5,000-5,200. "In the near-term, I think 5,200 might have emerged as a bit of a demon," he adds.
Yesterday, the Sensex and Nifty reversed gains in last hour of trade as the measures announced by the Reserve Bank of India to curb rupee's slide played spoilsport. The Nifty fell 31.40 points or 0.61% and closed at 5,114.65.
The June futures and options contract will expire this Thursday. Udayan Mukherjee, managing editor, CNBC-TV18 says, between now and expiry, the Nifty may grind in the trading range of 5,000-5,200. "In the near-term, I think 5,200 might have emerged as a bit of a demon," he adds.
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Below is the edited transcript of his comments on CNBC-TV18. Also watch the accompanying video.
It wasn’t a great night for the US markets, they came off quite sharply. We had our own share of disappointment yesterday with the big hype around policy expectations. But be that as it may this morning, global markets appear stable. There is no big sell-off going on following the US market fall. It appears we might also start on a flattish note and then take it from there, despite yesterday’s intraday reversal.
On yesterday's measures:
I think it was a terrible communication exercise. When the package came in, it didn’t look like such a terrible thing. They did a few things, small incremental steps in augmenting liquidity. If they are done without any kind of funfair, maybe you would have seen the rupee cool down a bit more. But this huge build up of expectations of an economic package, farewell gifts from the Finance Minister etc, that led to the market undoing because it has just started. It went completely ahead of itself in terms of expecting big things from a government, which has delivered nothing for three years. Leopards don’t change their spots overnight. I think the market made a mistake in expecting too much and the government did a completely botched up communication exercise. So, there was disappointment yesterday.
Does it mean that the market gives up completely on expectations? I think not. I think the market will wait for a few days till the end of the presidential elections and see whether the Prime Minister who is tipped to take over the Finance Ministry portfolio will do something at the end of that exercise. So, I think we have got a window now from next week, first week of July to maybe Independence Day. I think that is the window of patience for the market, a six week window. If at the end of that window, market feels that only baby steps have been taken and the government is still not keen on delivering stuff then that will be a complete write-off till the next elections. I think then we run the risk of some serious de-rating of our market. But I think, for now, it will hold, it will only hold for six weeks or so not indefinitely. The government better delivers, talk less and do more unlike what it did yesterday.
On global markets:
Cyprus, which was simmering for a while, has put its hand up for a bailout. You can see that the way Angela Merkel is talking and hers is the only voice that one should take seriously, the others don’t matter. She writes the cheques. She is saying that she doesn’t want Eurobonds and that’s the sum and substance of it. If you don’t have Eurobonds at this meeting, you don’t have a direct EFSF (European Financial Stability Facility) use for buying out bonds then it’s a no game for the markets, which are building up expectations.
Looking at the price action of the last two days, actually it appears that markets have given up on expectations of big things from the summit which is good because last few times it approached the summit with expectations, it was inevitably disappointed. I think we are headed in that direction once again. You can see it in the bond yields, Spanish yields have started rising once again and that’s a good wind vane on what the markets are expecting from this summit. So, expectations are low. That is good. But there doesn’t seem to be anything in the horizon just immediately that will spark off a massive risk on phase, which was the expectation that was driving the hope, maybe extension of another four-six weeks of global rally.
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