Big week for market, watch out for May expiry: Udayan

This is the start of a very important week for the market with a lot to play at. It is the F&O expiry for the May series, with a lot of big results, the unresolved fuel price situation and of course global markets which still remain very unresolved, says CNBC-TV18’s managing editor Udayan Mukherjee.

We did manage to crawl back a little bit on Thursday last week but this one is going to be big one particularly since there is expiry here as well. Also Read: Outlook for Monday: Can Coal India push Nifty higher today? Below is an edited transcript of his comments. Watch the accompanying video for more. Q: Lots of macros as well as GDP by the end of the week. Soon we will be talking about the policy. How are things in comparison to last week?
A: It still remains quite uncertain unfortunately. Yes, we did pullback a little bit on the petrol price hike but we haven’t got too much follow up on that and global markets are also to-ing and fro-ing. Given that there are lots of results this week we might see the market drifting in a bit of a trading range and being volatile leading up to expiry.
Since there are very important numbers like Tata Motors, JP associates, M&M, ONGC, SAIL, Coal India today, etc, you might just have a situation where the market falls into a 200 point band, is fairly violent within that depending on the newsflow. Then we wait to see what the government has on its mind in terms of fuel prices and whether that can push the market to 5,000 and 5,000 plus kind of levels. Q: The fuel price issue will be important as well in terms of whether the government chooses to blink on it or actually go ahead on more crucial issues like diesel?
A: Yes, in that the petroleum minister’s communication was not very firm and assertive. He just bought a bit of a time for himself and did not tell us whether there will be some rollback on petrol. He stayed away from any kind of commitment on diesel and LPG too.
So the market is probably now beginning to feel a little disappointed because informally in many quarters the government might have made some commitments of at least a Rs 3 diesel price hike and probably after the kind of response from the petrol hike they have not had the courage to go out and broach that subject.
So in the near-term, that becomes a key local trigger because petrol is now put to bed and anyway that does not move the needle too much on deficit. But this week the market will watch very closely the kind of statements coming from Delhi, whether an EGoM is announced and if it happens, given the kind of response that we are seeing on petrol, if the government can go ahead with an Rs 3 kind of diesel price hike.
If the market gets the sense that that’s not happening anytime soon, then it will begin to feel quite disappointed because on the local front this is really the only key trigger for now. So that becomes the key thing to track and monitor this week and of course the rest is global on which every day brings new news so that’s absolutely impossible to predict. Q: A word on the index first?
A: There is no cue for the market this morning. There is no reason for it to go up, no reason for it to go down at least right now. Today US markets are shut overnight so there is not going to be any great global trigger tomorrow morning. We spend a listless day out here in this 4,900 kind of range, maybe at some point in the day we may attempt to move up to 4,950-4,970. Early morning we could see a little bit of a drift down maybe closer to that 4,900 level but a tight range, maybe a bit of volatility within that range.
Traders have low conviction now because the market has become volatile within that 200 point range over the last few days. That happens often when the markets have a very short fall, they form a bit of a range but within that there is a lot of volatility and we have seen that range between 4,800 and 4,950-4,960 for the last five or seven sessions.
The market has not violated any of those levels so it’s difficult for short-term traders right now to be trading the market because it’s essentially throwing a dart in the dark on how things might pan out. Things remain difficult globally and in the local market there is the oil price news which will probably determine whether we go up above 4,950 in the near-term. It’s best to focus on individual stocks, there are lots of results coming in this week so the traders will do well to focus on that rather than taking any big bets on the Nifty. Q: What about the flows situation? Does it get back to monitoring that?
A: That’s not comforting, I know the rupee has pulled back which is partly to do with expectations of fuel price hikes as well as lots of talk by the Reserve Bank of India. The RBI governor met the Prime Minister so there is a sense that New Delhi is quite alarmed at the pace of the fall in the currency and therefore it might lean on the Reserve Bank to act a little bit more proactively in the near-term.
So the market probably expects that in the course of the week you might see a little bit of action coming in from the Reserve Bank of India, maybe the off talk about buying directly from the oil companies or supplying to the oil companies directly dollars, all of that might happen but the rupee will be quite critical because it went to 56 plus last week, pulled back 55.30-55.40 by the end of the week which is something which the market has been monitoring quite closely.
In that context, flows are a bit disappointing because on Friday, cash markets selling Rs 600 crore or seems to have picked up and that’s not good news. Also, there has been quite relentless shorting in the Nifty futures over the last three sessions from the FIIs so despite the petrol price hike, FIIs don’t seem to be in any great rush to cover up their short positions which is not very good.
In fact, if you look last week, the combined selling in the cash market plus the Nifty futures is about Rs 3,500 crore which is not very insignificant in the kind of shallow market that we are trading in. So, flows remain a problem which is why unless something dramatic happens globally or we do get that diesel price hike, the market might struggle at higher levels to stay afloat.