Global mkt selloff averted; boring phase for Nifty: Udayan

Global markets seem calm after Fed chairman Ben Bernanke’s testimony. He spoke in an ambiguous tone but the market sentiment has not been rattled, said CNBC-TV18's managing editor, Udayan Mukherjee.

Bernanke said that tapering may start this year, but it will be data dependent and that sort of kept the US bond yield around 2.47%, which is what an equity market participant wanted to see today morning, he added. Also read: Here's how RBI move will help mutual fund investment According to him, the market is about to enter a boring phase because impetus on the way up and impetus on the way down, both seem to be cancelling each other out. Below is the verbatim transcript of his market commentary On Bernanke testimony Bernanke is a master at balancing things out. He took a couple of steps which resulted in market volatility in the last few months and that was a departure from tradition and that might have rattled him as well. After a testimony like that where so much was expected for Dow to end absolutely flat, I think he did his job overnight. Basically, what the Federal Reserve (Fed) is saying that they will still taper but it will be data dependent. While that may keep the bulls and bears happy for the moment, it also makes for market volatility because now the market does not have in his words a preset timeframe, which is why it will keep guessing all the time. Every data point which leads it one way or the other, you will see markets reacting because it will have to make that judgement call itself without being spoon fed by the Fed. That makes for some volatility on the data and that may well continue. However, the fact that the US bond yield has come down to 2.47% from the high of nearly 2.80% is a meaningful cool down. That will let other asset classes perform at least in the near term. Also let crude performed as we have seen. So, it is a mixed kind of a bag but just in the near term is there a recipe for a massive sell off in global markets given what the Fed is saying? I think the probability of that does not seem very high. On broader market Hindustan Unilever Ltd (HUL) yesterday held the market and that was entirely on account of technical factors. However, the market is about to enter a boring phase because impetus on the way up and impetus on the way down both seem to be cancelling each other out. On the way up, there is strong resistance because of very poor macros due to currency and earnings, which may disappoint over the next few weeks. On the way down, the market remains supported by the same set of stocks and the notion that global liquidity will not be terribly bad in the near-term. So a combination of liquidity expectations and the narrow universe of stocks supporting the index, you cannot build a picture of a massive sell-off in the market immediately. So we are going to amble in a narrow range now for the next few days. I do not see any great data points, which will lead to massive volatility in the market. So, it is possible that in the next two-four weeks you will have a situation where market volatility subsides a little bit and you get through a few weeks of a boring mid-summer kind of a trading band till the next trigger manifest itself. Something will crop up sooner or later. Either it is some very negative point in India or the rupee starts to go for a complete toss once again or globally some data point makes the market believe that it is going to be September. As and when those happen, you will see volatility again but for now, the chances of a fairly boring range bound market with a Nifty just holding 200-250 points range has become quite high. _PAGEBREAK_ On fixed income market Something has changed in the fixed income market and it is a very big market. If you look at the mutual fund assets under management (AUM), it is a huge market compared to equities. Last one week, some things have changed around and people’s perception of fixed income. A lot of people are very unnerved and destabilized on what is going on with the fixed income market because at least there you had a trend in place. One would make accrual of 9 percent plus some capital appreciation because the yield was continuously falling every year. If you were lucky you made 15-17 percent, if you were not so lucky, you still made 11 percent. Now that whole thing is under question. I do not know how this will work out for equity market. If it was in the US, one would have switched from fixed income to equities but in India, it does not quite follow like that. There is extreme unease for people with capital right now on where they should be deploying the money. On Nifty It may continue to loop around. I don’t know the levels, may be 5900-6100 and it just holds a 200-point range. You want to expand that a little bit, 5850-6150 that makes it 300 points. It is difficult to justify why the market will go beyond 6150 or thereabouts right now even in good global liquidity conditions. Equally, given the way some of these stocks are doing every day, one day it is Hindustan Unilever (HUL), one day ITC and some day it is Reliance Industries. It is difficult to see how the market will come down significantly below 5800 thereabouts in the near term. Something will have to change in the environment for that holy cow list of 9-10 stocks to crack. If that does not happen the Nifty is probably well supported. However looking outside the index even yesterday the index held out. So if you looked at that you would have thought it is a good day for the market but midcap index was down 1 percent. The breadth was bad, banks got butchered once again. Look at the way the non-bank financial companies (NBFCs) have got butchered over the last couple of days and this was a space which a lot of people had money invested in but almost all of them have corrected 10-20 percent. The clusters which you can bank on are diminishing with every passing day. That makes for an uncomfortable looking underlying market but at the level of the Nifty, it will still keep floating in a bit of a trading range.