Global mkts stable; Nifty may see temporary pullback

The political drama in the country continues, but global markets look quite stable. Indian indices fell quite a lot over the last two sessions. One can now for a temporary pullback because the market looks quite oversold after the price performance in the last 48 hours, said CNBC-TV18 managing editor, Udayan Mukherjee.

Below is the verbatim transcript of Udayan's comments on CNBC-TV18 The fall for our market has been really bad especially relative to other global markets. Yesterday, many markets did quite well  but we just shrugged it off completely and that too on the back of a 100-point fall of the previous day. Our market did not latch on to global strength to attempt a pullback, which is why there are shades of being oversold in the market right now. Markets fall but they do not always fall in a straight line. Today, either in the morning or at some point, there are very high chances of a pullback. I am not using the word rally because those have tended to fizzle out but there is a chance of a pullback. The midcaps too collapsed and yesterday, the midcap underperformance started to come to the fore again.
 
It is a disturbing looking market. The only thing for near-term traders is that it has probably got too oversold and therefore they need to watch out for the possibility of a bounce at some point today, tomorrow. What one can do with that bounce and how short-lived it turns out to be depends on a few factors. Even the political situation is in a bit of a flux and it is dominating the pink paper headlines again. So, I think it is not great but maybe oversold and ripe for a bit of a pullback. If the US was not doing what it is, then this morning probably we would have been talking about much lower levels on the index. That is the one thing which makes me pause and think about whether the market will fall in a straight line or not because the US is still in a bull market. In the US, one by one difficult news keeps coming in but the market responds by going to new high everyday that is a bull market. They have got the best of both worlds right now; their economy and earnings are slowly improving, and the Fed is throwing more liquidity at the market. So it is no wonder that the US market is in a bull groove. I know India is underperforming and that is cause for concern but as long as the US market is in bull groove it will probably prevent huge waterfall declines in the other markets of the world because that is the mother market. So, as long as the mother market is in a bull market, you probably won’t see deep bear markets in other parts of the world. Moreover, the US needs to start a correction even if it’s a bull market correction of its own, for us to slice through some of these levels; we have been talking about because the US is still a powerful magnet, which holds our market up somewhat. So, this morning the bears should consider the global set up as well if they are very aggressively short on the market because that in the near term might cause them some discomfort. India is not looking great and it is not just a matter of opinion but it is a matter of data. Opinion guides money but so does data guide money. A lot of the new found faith, over the last one year in India has still not shown through in terms of hardcore data. People keep talking about how the economy has bottomed out, that earnings have troughed out but if one looks at the data points they suggest otherwise. Traditionally, we used to look at things like cement, auto, which are closely linked to the economy. Even in cement last month we have seen a degrowth in cement sales for the first time in 12 years and people are saying that this will continue for another quarter. So, if cement is degrowing, if autos are collapsing, if consumers are seeing much lower volume growth as you are hearing from more and more companies then what is the bottoming out of this economy. I am not even talking about the investment side, the infrastructure side, which has been comatose for three years now. But consumption, autos, cement, all these data points are telling you something, which is flying in the face of this optimistic chatter about how the market and the economy has bottomed out already. So, India is not looking pretty at this point in time. I hope like everybody else things will improve but that is just hope. Our best hope is that globally things are okay, some part of liquidity keeps coming in and that prevents very ugly downsides in the market, which can happen. It is a possibility but this is not to say Indian fundamentals are glowing and therefore market should go up. _PAGEBREAK_ On the political front, I am told that there is a Samajwadi Party (SP) meeting this morning, they are still quite angry about the Beni Prasad Verma episode, they have not called their threat back. It is an evolving situation and there might be a little bit more noise which the market does not like. So, I guess yesterday’s underperformance relative to other markets has a bit of a political shade to it as well. The reason why we did not participate is maybe because the market was fretting about the kind of hawkish language, which was coming through from many parties. You can already see that the government is hobbled this time. You can let one ally go, you can let two allies go but right now there is no margin of safety and you are pretty much down to the last ally and the last ally looks like will extract his pound of flesh. Now there is a possibility that in March, we do not see a diesel price hike because in the midst of all this chaos, will the government want to push through with a diesel price hike. However, March is not important, you can have it in the first week of April, and the market will not die because of that. However, whether these are indications or signs of things to come in the future despite the Finance Minister asserting yesterday that its business as usual but it seems like business may not carry on as usual if the SP is to be believed. It has come as a bit of a risk factor on the margin at least. The commentary yesterday was that we are probably heading towards winter elections, the way things are shaping up. That may necessarily not be a bad thing. But the initial reaction of people would be that there will again be political uncertainty. Maybe some of the less mature people who have money invested in India, exchange traded fund (ETF) variety might suddenly start saying if there is going to be political uncertainty; we need to take our money out for the moment because not everybody is a long blue-blooded India hand. However, we are going to get there anyways, so we might as well cut this uncertainty and get there in six months. The first reaction will probably be down and then the studied reaction might be it is good if elections happen a bit early. This will simmer in the system for a few days. I hope SP does not do anything very rash because that will probably pave the way for a break of this 5,600 level at least in the near-term. Coming back to the market; the events over the last coupled of days have not only pushed the market way back in its trading range but they have also robbed the bulls of any kind of optimism. The last couple of times that the bulls got hopeful when the market rallied; they have got smacked really hard on the hand. So, this time even of there is a rally or a pullback of 100-200 Nifty points, they will be very cautious about participating in that because of the experience of the last couple of days. It is also very dispiriting with what is going on in the broader market. Every time the Nifty gets into trouble, the midcaps start collapsing. Yesterday, we saw what happened with many of the midcap names; HDILs and Delta Corps are again coming to the fore and that is very bad. A 15-16 percent fall in reasonably largecap stocks is very scary. So, the market sentiment is bad. However, in the near term, the global market have still not broken down, the US market particularly. So it is conceivable. What do bears want right now; they might want the market to just go down completely. Even the investors might want all the poison to get flushed out in one go and if the Nifty has to go to 5,200, let it do it now in one shot and let solid money come in and buy that dip. But the markets don’t oblige, markets are very cruel beasts. They will slow poison you. So even if the market has to fall later, it is conceivable although not sure that the Nifty spends some time in this 5,600-5,900 kind of zone and frustrates the bears by not breaking that level and then eventually it may break down. The path is still unclear; the market is facing a lot of difficulties and will not be a surprise if it seeks out lower levels than where we are, eventually. But will that happen immediately, or will it again do some ranging movements before the breakdown? That is still quite unclear.