Markets likely to see sharp pullback

Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other CNBC-TV18 anchors have to say

Friday looked a bit scary but today we have better news to play with. The global markets have turned around at least for the day. The gross domestic product (GDP) numbers in the US were not as bad as the markets feared and that's lead to a powerful back in the US and sparked off some recovery across the world of equities and commodities.

CNBC-TV18's Managing Editor Udayan Mukherjee says, "So this week we start off on the front foot after a very poor closing that we saw on Friday. Let's see if we can build on that."

Mukherjee adds that the market will see a sharp pullback as US GDP number was better than expected. "The fact that the market was preparing for a bad number and to the extent that bad number did not come through you will see a pullback, no question about that and that might be a sharp pullback because a lot of traders might have adjusted for a bad GDP number," he elaborates.

Here is the verbatim transcript of his comments. Also watch the accompanying video.

Q: We needed the good news from the US markets though from where we closed on Friday?

A: Yes good timing. Because the market I think closed on a very sober note on Friday perhaps an apprehension of a very bad GDP number but that did not come through 1.6%. US GDP Q2 was better than what the street was expecting and that has led to a pull back from the brink of that 1050 mark on the S&P. Commodities have rallied a bit, Crude is back to USD 75 per barrel and the dollar index is also been quiet.

Just in the near term the market had got oversold on fears of a very bad GDP number that has been taken care of and to the extent that the market had sold off quite a bit. Maybe even shorts had build up in the system.You might see a little bit of a pullback in the market both out there and followed up on the Nifty which fell off quite a bit on Friday.

So yes little bit more cheer but we need to see resumptions of flows for the market to start moving above 5,500 here as well because flows are weak for the last three days. This news gets us relief on that front most crucially.

Q: Friday was pretty worrying though for the Index especially because of the cascading nature almost of that last one hour?

A: And it was lead by banks which you do not want to see because that is dangerous leadership on the way down. The fact that the market was preparing for a bad number and to the extent that bad number did not come through you will see a pullback, no question about that and that might be a sharp pullback because a lot of traders might have adjusted for a bad GDP number.

You could get the market bounce back to somewhere between 5,450 to 5,500 during the course of trade today. The big question is once that is done what can drive the market higher and to that question the answer is a little difficult because we did not see leadership on the way down on Friday.

We haven't see good flows for the last three days and in the context of that what Ben Bernanke said that he will do whatever it takes might actually just be taken up positively from a liquidity point of view because if he does what the market is expecting then there is more money to be sloshed around in the global system.

If this means that there could be some resumption of flows after the 150 point fall on the Nifty then that is good. We can get back to 5,500 not past 5,550 just yet because that is still going to be a sticky area of resistance if we get anywhere close to that in this pullback but for the moment you will get a pullback. It then depends on flows and whether the global markets might stabilize further leading to the unemployment number on Friday.

It is more or less for the moment since we have corrected depended on global inflows for the next 5-6 sessions. We should not expect too much by way of near term decoupling.