Long phase of consolidation may end in Nov series: Udayan

The October series is history and hopefully with that, the long phase of consolidation for the market might come to an end because in the last three weeks, the Nifty has been stuck in just a 100 point range. There were no signs of moving either side of that, but now the market wades into November where it will get pass the earning season, but run into some very important news triggers potentially.

The hope is that our market will nudge out of this series; it will not be on the way down because global markets have looked a bit edgy over the last few sessions. So, on all accounts it will be a fairly important series for the market after the sideways movement of October, said Udayan Mukherjee, managing editor, CNBC-TV18. It is a tough call whether it would be range bound or see a breakdown in November. The market has not given any kind of signs over the last three weeks of which way it wants to head. Admittedly, we are going through a slightly difficult phase globally, but the market is not showing great strength globally at all. Flows have been okay, but it is too close to call the November series. For now, the way the market expired yesterday bang on the dot of 5,700, it has not given the bulls or the bears or any great sign of what it wants to do early in the series. So, at the moment the market is watching global cues. The phase of a mild risk-off that has come, look at the way the currencies have moved and also the euro trading below 1.3/USD, so if that starts to get aggravated then the chances for breakdown do exist, albeit a small breakdown. Otherwise, the market could surprise on the way up, but it is too close to call as we enter the series. I don’t think it will be about specific stocks within the range of 5600-5800. The November series is probably setting it up for a slightly more secular move in the market because we have seen 3-4 weeks of consolidation. November is an important month. We have just got the monetary policy on Tuesday and that will influence decisions at least in the near term. Shortly after that, we will get into the US elections which will create some degree of volatility in the global space. After US election results, our own winter session starts off and before that a cabinet reshuffle will happen. I’m not sure whether there will be any more policy announcements in the first half of November. There is a lot from the global and local political landscape, which might be important. Those kinds of announcements unleash a secular move in the market, not stock specific moves. I wouldn’t be surprised to see a 250-300 point kind of move in the November series either side of where the market is right now. I hope it is on the way up and the Nifty goes closer to the 6000 kind of level through Diwali. But, there is a possibility that the markets may correct if global markets deepen their correction, particularly around important political events. So, 5,450-5,500 outcome though a lower probability item, should not be ignored completely. Our market has been in and around 5,700 for a long time now and it might choose to spend another couple of days there. It needs a trigger to break out, and that it can come from a strong swing in global markets over the next couple of days. If that happens, may be our markets will nudge out of that range. The RBI policy will be released next week which will also be quite important. Over the next few days, there are some important earnings. Though, I don’t see earnings actually taking the Nifty higher or lower beyond the range, because they are mostly into the price. But some of these earnings are heavy weights for the index like HUL, ICICI Bank, so, as they declare numbers one might see small impulses taking the Nifty towards the edges of 5,740 and 5,640 kinds of levels. But a big break below or above that level, needs a slightly bigger trigger, which could be global or a surprise from the RBI. Those are bigger impulses than what can come through from the earning season. If the results of HUL and ICICI Bank are good and it will take Nifty close to 5740 zone, then on Tuesday when RBI presents with a repo rate cut then the combination of the two might affect a breakout above 5,800. Now that’s a scenario, it may not work out well. The other scenario is more weakening of the global markets over the next couple of days. If there are no major surprises from earnings, and then the monetary policy is a status quo and therefore 5,640 gets taken out, so which scenario plays out is yet to be seen, but the chances of breaking out of that range in the November series seem to be quite high. It will not be impossible, but unusual for the market to spend two series back to back in a 1 percent kind of trading range. We have to see whether we are going to 5,900-6,000 in this series in November propelled by some of the events we spoke about or we have a deeper correction, a 5450 correction, which is a 250 point kind of a dropdown from here. I don’t think it might happen to that extent but if it does, then it might present an excellent buying opportunity for a lot of people who have missed out, unless some conditions change on the ground which we cannot see today.