SENSEX NIFTY
Apr 05, 2013, 08.53 AM IST | Source: CNBC-TV18

Technical mismatch, lack of buying causing pain: Udayan

The sooner this week comes to an end the better, says CNBC-TV18's Udayan Mukherjee.

The sooner this week comes to an end the better, says CNBC-TV18's Udayan Mukherjee. "Last couple of days have been some of the worst sessions that we have seen over the last many months. Two days nearly 200 points gone on the Nifty. There is a scare on the street no question about that and despite the US markets remaining quite stable over night, the signs across many markets in Asia including the SGX are not looking very good. So hopefully markets will stabilize today after such a fall but as we saw yesterday no guarantee of that," he says.

All hell brakes loose

It has been a terrible week and lots of levels have come and gone; the 200-day moving average not being the least important. The only thing one can say is that right now after the last couple of days most traders will be very short in the market. Generally, the mood will be of complete despondency and bearishness. You have had a big fall, crunching fall backing of capitulation over the last couple of days and sometimes when people start talking about scary levels on the way down, you will get one of these pullbacks.

I am not sure it is coming today. It may not come for a week. The market could go down in a straight-line after brief attempts at an upmove. All of these are possibilities but for short-term traders you would be careful about markets having fallen so much over the last couple of days in the possibility of one back lash, which might come quite easily.

That said, the signs from the screen are quite ominous. It is just that you are negotiating a territory in the market this 5500 area, which a lot of people have pinned their hopes on. So you could see a bit of buying, you could see a lot of attempts to keep the market above this level because once this goes I think we are setting ourselves up for not just a 100-200 point cut but a much deeper cut that we don't need to be talking about this morning. So for all these reasons, there might be an attempted pullback. I don't know how successful it will be, but for short-term traders who are sitting on lots of profits, the short traders, they should be a little cautious over the next 24-48 hours.

On outflows Vs inflows

It is not so much the outflows yet. It is just that the buyer has stepped away. It is not like they are selling Rs 1,500 crore a day. The sell figure is only Rs 300 crore albeit on the futures market a few numbers are quite large. It is just that the only buyer in the market has stepped away. So, the fall is not as much as intense selling, it is absence of buyers in the market where pretty much the only guy who had money to buy, who was deploying cash to buy is now absent and therefore who is going to pick up the stock, which is coming in. The domestic institutions are not doing it, retail for sure is not and foreign institutional investors (FIIs) have just started being sellers on the margin.

So, there is a complete technical mismatch and absence of buying in the market which is leading to this kind of pain. The fear amongst people that the buyer has stepped away is leading to even more conviction on the part of the bears and creating a cascading problem or vicious cycle kind of problem out here with the technicals. So, it is not a great technical situation that we are going through right now despite the fact that the cash market selling is not very huge. It is just Rs 250-300 crore a day but look at the impact out here, we are falling 2 percent every day on Rs 300 crore of sell. So I think it is rather absence of buying out here.

However, you need to watch the global space very carefully as well because some big things are happening. What happened in Japan yesterday could be of significance not just to the currency complex but to global liquidity. Also, now most central banks are moving in one direction by flushing the market or economies with liquidity. So, that is something that should not go unnoticed but just near-term, we have got a buyer’s problem on our hands.

READ MORE ON  Sensex, Nifty, FII, Nifty, US markets

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