Mkts may pause on soft global cues

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As concerns about the euro zone banking system pull world markets lower, CNBC-TV18's Managing Editor Udayan Mukherjee says the markets here too may take a pause. "Global cues are a little soft and we did not get great global flows yesterday and today we may not either," he reasons. But if Europe is sort of stable and doesn't fall 1-1.5% then we may be hover between 5,550-5,600.

"We have come to 5,600 quite easily but do we stop here, pause here, soak in some of the global news and then make up our minds or can we move on ahead regardless of the slightly softer global cues, we will find out over the next couple of days," he adds.

Here is a verbatim transcript of Udayan Mukherjee's comments on CNBC-TV18. Also see the accompanying video.

Q: Worries from Europe have not ebbed apparently?

A: Yes that is a little disconcerting because it had sort of died down and suddenly yesterday we heard about certain rumblings from the European banks once again, that is not great news. The Euro took a little bit of pounding yesterday and that has led the Dollar Index back into the game. The dollar was weakening, which was good for commodities and for us but it has got its head up once again.

I don't think its alarming because this kind of news flow you will expect over the next few months. We will just have to muddle through this kind of news flow on an odd day or on an odd week. You will continue to hear of bad macro data and periodically some of this European news flow; a few weeks back we heard bad news of about the sovereign situation like Hungary etc, but the market negotiated with that pretty well. There is no way to say what happened, what was reported with German banks yesterday, has the potential of blowing up in the next few sessions. But for now we regard this as a blip-little bit of set back with news which the market has to absorb and move on.

I don't think anything dramatic is happening but if people had expected that starting this week as US opens up, people get back from holiday, we will get a momentum push those hopes have to be stalled for a little bit.

Q: Will this prove to be any hindrance to the gushing flows that we have seen?

A: Hope not but yesterday we didn't get any cash market money from the FIIs and the day before was a Rs 1,000 crore plus cash market figure and you saw lot of largecap stocks moving on very high delivery statistics and you were hoping that that is not a one-day blip and can continue for a few sessions. But yesterday, for the European reasons or not, we didn't see FIIs buying too much. Of course the options activity is furious and the number of 5600 Puts and 5500 Puts which were opened up yesterday was staggeringly large.

So you don't know what that means, it could mean both ways. It is bullish thing that people are writing Puts or the FIIs are hedging themselves even more by buying 5500-5600 Puts. It is difficult to take a call on that but the options activity is quite interesting to say the least.

But over the next few days, from where we have reached at 5600, you would need little bit of cash market delivery-based buying to get the market going because it doesn't appear that that even after the breakout retail HNI Money has started sloshing around in a big way in our market enough to lend it momentum at least.

Q: Is profit booking inevitable today?

A: Yes little bit may be. We moved past 5550 which was a hump and we went to 5600. As global cues are a little soft and we did not get great global flows yesterday and today we may not either, the market may just pause. It is not usual for the market to go back and test break out levels every time it does that so it may go back and spend a range between 5550-5600 in the first part of the day. Let us see how Europe opens up today because that is where the problem has cropped up once again. If Europe is sort of stable this afternoon and doesn't fall 1-1.5% then we might be stable between 5550-5600.

Any more than that we will have to see but right now I think the market seems quite stable. There is lot of opinion which is veering around to the fact that it's getting over heated and people would welcome corrections but that is not happening. So I guess you now have to say that the proof of the screen for the last few sessions has been that the uptrend is on and people will keep trading long with stop losses. For some it will be 5550, for some 5500 or for some deeper but shorts will be very skittish about being very aggressive after what they have seen for the last few days unless they get a lot of support from global news flow.