Important for Nifty to hold 5000: Dipan Mehta

The wholesale price index (WPI) rose 7.55% in May from a year earlier. In an interview to CNBC-TV18, Dipan Mehta, member, BSE and NSE says, today’s number certainly diminishes the chances of a rate cut. “Certainly, it’s been a bit of a dampener,” he adds.

He further says, it is important for the Nifty to hold the 5,000 level. “If you suddenly have the Nifty trading below 5,000 then again I think the entire mood and the sentiment will take a very sharp dip,” he adds. Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Ekta Batra. Also watch the accompanying video. Q: How are you reading the reaction of the equity markets to the inflation data? Do you think that we are going to get a rate cut on Monday in terms of the repo?
A: I think today’s number certainly diminishes the chances of a rate cut. Market was expecting this inflation number to act as a bit of a trigger to take the market to higher level and perhaps consolidate this upmove, which we have seen over the past eight-ten trading sessions or so. So, in that respect, certainly it’s been a bit of a dampener.
But RBI has its own thinking. Sometimes they tend to surprise the market more often these days than before. So, let’s just keep our fingers crossed. Hopefully, there will be something positive on Monday.
Apart from RBI, I think global markets are also watching Greece. So, this particular data point is over and done with and its already got discounted and now the action will shift to Greece and RBI policy. Q: How would you expect the market to react on Monday? Would they be elated, if there is a 25 basis of repo cut or would they be elated if there is a 50 basis CRR cut or will all reactions be muted and as you say only concentrate on global markets?
A: I think the latter. I suspect that so much of discussion has taken place as to what RBI will do in terms of rate cut as well as CRR cut that even if they deliver as per street expectations, which again I think is highly unlikely, then also I think markets will not be too enthused. It’s not that if the interest rates are cut by just 0.25% and there is no CRR that we will see a 3-4% down move. It’s just that at this point of time also if we see technically, we need a bit of a trigger, we need follow up buying, we need positive FII numbers.
The market has gone above 200-DMA. It needs to continuously trade above those levels for an extended period of time before the bulls get some confidence. The question I keep asking myself is, ‘will the RBI policy do that?’ That’s something which we will have to wait and watch. So, it’s more important that the market holds these levels. If you suddenly have the Nifty trading below 5,000 then again I think the entire mood and the sentiment will take a very sharp dip. Q: So, you are saying this time around any reaction to the market would perhaps be restricted to 15-30 minutes and then the market will start looking at other things.
A: That said I think the markets may suddenly flatten out, once you know what is happening in the case of Greece. There also the view emanating now is that it is not going to be a one day affair, even after the election results are out, it is going to be extended. So, there may be another week of uncertainty and then the trend will get finally set for the rest of the month or so. Q: What sort of floor do you think we are working with on the Nifty?
A: It is a difficult question to answer because we are getting into a lot of events, which can make or break the market. So, just let’s assume that the 4,800 bottom holds, even in a worst case scenario where Greece results are bad.