Today will be interesting, crucial day for mkts

Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other CNBC-TV18 anchors have to say Nifty BSE | NSE 30/05/12 Are Mutual Funds betting on Nifty?

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Past two days have seen some serious FII pull outs:

 

We have all been trying to figure out what is leading to this kind of selling. It could be a combination of factors it could be as Monday in a reason as people who have made a lot of profits for checking out before their vacations. It could be the global sentiment which is making people vary and I think the yen-dollar gives you a fair barometer of the risk aversion right now; consistently above 110 tells you that there is some risk aversion in the system. Maybe the trading money is a little skittish of putting more money to work in risky assets like emerging markets and there could be little bit of pull out happening there.

 

I think the risk aversion barometers are also flashing red for the moment. Maybe India's out performance is leading to some profit taking because it is overdue and the relative strength of the Indian market is inviting people to sell down that market.

 

The Nifty futures shorts over the last couple of days from FIIs have been quite disturbing and they are more than a billion dollars in just two days so that is a little worrying but let us see what the market does. Short positions are now built into the Nifty and who knows if there is an attempt at a pullback if some of those guys will cover up and then that might give a little bit more spike to the market but I think it is distressing for sentiment the way FIIs have been selling for the last couple of days despite those P-Note curbs. So it is not good what has happened for the last couple of days.

 

The global market situation is not good to say the least both in terms of the uncertainty on the next Fed rate move and the US market and the dollar in the way they are plunging are not very comforting signs at all. So all put together lot of gray out there, we do not know the situation, but I think confidence will be a little low even if there is an attempt at a pullback today, which would be technical in nature.  

 

Do you watch carefully what happens with that 5,500 mark?

 

One has to, because today is not a dire kind of a situation in the global space. So if today we have a situation where the Hang Seng was down 3% in the morning and all markets were selling off 2-3% then 5,500 would have been taken out today given the mood of the last couple of days if we had further pressure. But since we do not have great global sell off in place. I think even if the market were to go down to 5,500 at least for the day it would try and hold out that level and I think it may manage to do that as well at least for a day because we have fallen 200-300 points on the Nifty last couple of days, we were close to an important support level; at that level maybe some of the shorts would want to take profits, some adventurous longs will be created because it held out very well last time around 5,500.

 

So even if you were to go down there, I think there might be just around that level one will probably see both some longs creation or some short covering which could happen. It is entirely possible that we may see some kind of rearguard action at 5,500.

 

Medium-term does it hold?- It is very difficult to say what will happen because we wait and watch, we don't know the answer to whether it will hold because last time we approached that level and it looked very bearish but we managed to hold out well. So I think one step at a time lets go to 5,500 and see if it holds out and then we will take it from there.       

  

Has it comes to the point now for the midcap or the largecaps where you start taking a value or buy call at any rate?

 

A value call and a buy call would be quite different because people may well take a buy call because stocks have fallen quite a bit but I don't think those would be value calls. We have been in a momentum market and in a momentum market when the stocks fall off 10-15-20% often people go out and buy because they expect a resumption of the momentum. That's quite different from saying stocks have become extremely valuable and they have become extremely cheap, I don't think any of the midcap momentum are very cheap at this point in time. I would say 8 out of 10 stocks are not, so if you buy you have to buy from a technical perspective it's fallen those stocks were relatively technically speaking and they were exhibiting momentum and after the fall should we chase momentum once again that needs to be the question which you should answer.

 

I don't believe all that talk, which is going around in the market that great value, has immersed in many of the midcaps, which have fallen off 10-15%. One look at valuation will tell you that they are quite expensive relative to peers; relative to historical up performance, relative to global benchmark and they all seems to be very expensive. I don't think it is about value this is a momentum market and the answer for that question is yes we fallen enough and we need to go back and chase the momentum again and that is the way the market will pan out, sure enough then that can be the trade which will pan out well. But I don't think you should take it to the extent that the stock have become very cheap after the 10%-12% cut. I don't think stocks are very cheap so you need to differentiate the two. This is not a fundamental call to buy maybe just yet after the 10% cut but the call may well be technical and the call may well be right.