See Nifty in 100-point range; need 50 bps for mkt rally

Udayan Mukherjee, managing editor, CNBC-TV18 believes Friday was not a great trading day for the Nifty but adds that the week begins with Hindustan Unilever Ltd (HUL) numbers and good news on the monsoons.

"Probably the week ends with a rate cut on Friday. So, it could turn out to be a very interesting week for the market. The week has four days of trade with lots of earnings packed in and of course, some macro triggers as well. Let's see how the market deals with this small pullback that we saw on Friday starting today," adds Mukherjee. Below is the edited trannscript of Mukherjee's analysis of the market. We saw a little bit of a correction on Friday but I think it is too little to start to get alarmed about. What people will be focusing on this week is whether what we saw on Friday is the start of some kind of near-term topping out process or it is just one day pullback, which was adjusted for the massive rally that we had on expiry day. There are a lot of news points which the market can hinge on. This morning one can probably see a little bit of a lift because on Friday, we saw the market come off quite a bit. There is a little bit of a monsoon cheer and a couple of results which are expected. That is on the back of the global markets being stable and hence, we could see the market attempt to get back to more than 5,900 once again. I think next four days will determine whether we can hang in around that 6,000 mark ballpark or this market needs to give back some of that 6 percent rally that you spoke about. So, in that these next four days could be quite interesting. On global cues

Global markets are still stable. The only problem is that crude is stabilising or is seemingly stabilising around the USD 103 per barrel mark which is not great because one would have thought with the kind of momentum it was exhibiting earlier, we would have been down to USD 94-95 per barrel and kept our head there. However, that has not happened. Even gold has come back quite a bit from its recent fall and those were the factors people should not forget that led to the India rally or sparked off the India rally to begin with. The other thing that has happened is that after the initial gush of flows, people suddenly realize that some things have happened which are Indiamacro positive. We saw in five-six days a lot of foreign money suddenly come back to India after the rally to 5,900. One can see that Friday was the first sign that flows could be beginning to level out little bit because prices have changed. Many stock prices have gone up, the market may have gone up seven to eight percent but private banks are up 15 percent. Those are typically the kind of names that foreign investors want to buy. Such good quality stocks having gone up 14-15 percent in the course of this rally. Foreign investors are now saying okay the easy money has been made, now we need to be a bit more careful of where to deploy the money and therefore, on Friday, we did not see a lot of flows coming in. So, over the next five days we need to track flows once again on whether what looked like a lot of money at 5,500-5,600 can still continue to come at more than 5,900 or people have traded this rally and now they are beginning to get slightly more cautious about valuations again. _PAGEBREAK_ On Nifty Traders would have booked some profits on Friday. The gains were quite a bit and they came in just five or six sessions of trade, so I  assume prudent traders would have taken some profits on Friday. For people who are carrying their long positions, the picture is a little hazy, because one is not quite clear whether it was just a one day pullback or a two day consolidation after which the market will resume its rally and maybe try and get to 6000 kind of levels in the near-term. It is not impossible that that happens, particularly if we get a lift from a couple of these earnings in the first half of the week and we end the week with a reasonably good communication from the Reserve Bank of India (RBI). So, it is possible. I think this is the more plausible scenario is that the market probably forms some kind of a consolidation range and spends a bit of time here because that is often what the market does after big rally. We have had a 400-point rally and now, between 5850-5950 one sees some volatility, and a few days of trading, but within that ballpark range, the market figures out whether the bulls are stronger or the bears are stronger. I will not be surprised, given that Wednesday is a off, that the Nifty trades in a 100-point range. We will see a bit of intraday volatility like we saw on Friday and then depending on the news flow the Nifty breaks out one way or the other. However, for most traders who are long, it maybe prudent to trade with a trailing stop loss which is not very far away from the index, so that in case the market turns for some reason and nowadays turns can be fairly sharp, one protects most of the profits that have been made over the course of the last one week.

On RBI monetary policy on May 3 The positional trade for the week depends on what the market has priced in. A 25 bps will not lead or spark off a big rally in the market. When the rally started 7 or 8 days back, two or three things precipitated it. One ofcourse was with the way gold and crude came down, but the other thing also was that Wholesale Price Index (WPI) inflation reading which led the market to believe that there will most certainly be a rate cut. So, a large part of the 25 bps rate cut is already priced in. For a market to rally on Friday on the back of the RBI communication, we will need 50 bps or we will need very dovish commentary from the RBI. I do not know whether that is coming but, 25 bps I do not think will move the needle too much. If one goes back and sees the last couple of policies from the RBI, the market has not done very well after 25 bps cuts. So it needs a surprise. The obvious outcome is priced in.

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