Nifty may edge back to 4,750 levels

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Markets will trade today on the back of a NSE software testing session. The markets will trade live from 11:00 am to 12:30 pm.

Udayan Mukherjee, Managing Editor of CNBC-TV18 feels Nifty may edge back to 4,750 levels before flattening out. "Typically, when you don't have the prospect of institutional investors playing around, domestic traders, high networth guys do try and push up their midcap holdings a bit."

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

On markets today

It is Saturday morning and we are here because National Stock Exchange (NSE) has decided to do a testing session, so we are live today from 11.00 am to 12.30 pm, which gives us a bit of an opportunity to react before Monday morning to the proceedings of the US market, not that anything great happened in the US market overnight.

So very flat cues from there and we may have a session without institutional participation but generally volatility is so high that maybe it will not be such a flat and boring session after all.

On Nifty

There is a little bit of a positive leaf to take away from what happened yesterday. it is not conclusive because it is still a flat kind of closing, I don't think that the US markets gave you the kind of pullback rally which all other markets would want to see but nevertheless it is almost a 200 point pullback on the Dow from the lows of the day and that tells you that the market is not sliding through without any kind of support. Periodically, these supports are coming in so it is not a water fall kind of a decline that we are seeing.

Yes, the declines have been sharp but they are not continuous and they are punctuated with some kind of day sessions of stability. The dollar has also retreated a bit which is not bad news but despite that I think the concerns linger, Europe had a bad session last night and even the commodities have not recovered in any meaningful way so I think it is very premature to say that we are out of the woods here but at least can we put in a couple of days of stability and even a short pullback, I think the hopes of that got raised with what happened in the US markets.

On market sell-off

Friday was horrific but today at least we will not have to live with the prospect of heavy foreign institutional investors (FIIs) selling and that has been the big problem for this market. I don't think on Saturday there will be any FII action in any case domestic institutions who may not be present as well, they are generally on the buy side now so that is no problem.

So if there is a session with a little bit of stability in the US market and with the prospect of no FII selling, could that be a session of mild short covering particularly in the broader market which has fallen off.

So typically, when you don't have the prospect of institutional investors playing around, domestic traders, high networth guys do try and push up their midcap holdings a bit. So you could see a day where the Nifty tries to edge back to 4,750 kind of level and then flattens out and some of the midcap stocks which have got hammered for the last couple of days, try and stage a bit of a come back.

So for individual stocks it may still not be such an inconsequential session, for the Nifty though I think 4,750 and then a bit of flattening out pending how the Asian market reacts and picks up the US trade last night seems like a likely kind of path.

On domestic support

The domestic money not only now has to support the market but it also has to support issues like NTPC. So I don't know at the end of all this exercise how much cash the insurance companies will be left with to put in the secondary market but because they have been doing a huge job of defending the market against the FII outflows. What is disturbing also is that FIIs have started shorting Nifty futures once again with great gust to almost 2,000 crore of Nifty futures shorting. It is no surprise to see that the 4,800 put writers and the remaining 4,900 put writers are scrambling to cover.

That was expected the moment 4,800 broke on the way down. So the fact that there has been a scramble on the option side was only expected but after two days of relative calm from the FIIs where they did not sell too much again came the Rs 1,700 crore sell figure on the cash side and that I think will worry the market. So you may have modest pullbacks because of short covering if the global markets stabilize for a day or two but the fact that the FII selling is not clearly done as some people suggested last week continues to weigh on the markets back big time.