From Darkness to Light

The Political equation is solved. The N-deal is on the execution path. Oil is stabilising near 125. Inflation has been arrested below 12 (though it still remains a threat). So, good news?? Well, add a few bad ones.....The expected quarter percentage rate hike by RBI on the 29th of July and its cause....the stabilised but still high inflation. The blasts in Bangalore and Ahmedabad. The demons of darkness have done it again.

The final picture is thus prepared. And the fallout?? Markets to remain subdued for the day. Expect negative returns from the market though mostly on the basis of global cues and the F&O market. Bank quarterly results are also coming out and don't seem very enthusiastic. Overall, maybe the markets will see a soft decline in the range of 1-2 pct with a far greater impact in the Bankex. F&O though should provide the ray of hope in the coming days. "The present is murky alright, but the future seems bright".

Two steps forward and one step back?

One step forward and two back. That was the mood till a month ago. And then came a spate of good news. Oil, the government, global cues......and in a flash the mood changed from pessimism to optimism (two steps forward). But as any market expert would tell you, such flashy optimism can be dangerous too, and thats what happened in the BSE and the Nifty yesterday. All cues, global and local looked positive, except maybe the inflation and the propensity to take profits. And what happened was exactly the latter. The markets opened positive on the back of the cues but heavy profit booking led it down down and out.

And to add salt to the wounds, what we have today is all negative cues globally, except perhaps the few local positives (if you read them as that) of inflation getting arrested below 12, optimism in the energy sector, and a hope things will smoothen out soon. Look out for both indices searching for clues to go up. Volatility should prevail but in taking the markets to lower levels. Overall, should ossicilate in the -2.5 to +0.5% for both markets (One step back). Further cues would be had when Europe opens for trade, but dare I say it may be a negative cue from the Eurozone? (look out for a further decline by day end) And shall I call it two steps forward and one step back? Maybe I should.

The mood is up

The BSE and Nifty yesterday reacted swiftly to the news of the government saving itself (never mind if it couldnt save its soul.....cause for the financial world, the cause and effect is more important than the process of change that brings forth the result). That the crude strengthened itself in the sub 128 (now sub 125) its peer markets world over a further impetus, can be gauged from the fact that after a long time, there has been a close with an upswing rather than a decline. The volume in the market has gone up to 95,000 crores, a figure we were dreaming to achieve just a week ago. FIs also for a change, have gone ahead and invested than cash out on the mood of the market. The expected Banking reforms bill was also in part responsible for the Bankex moving up.

Looking ahead for the day, though the sentiments are up, there can be some cashing in on a positive market for those positions created in the nadir. Then there is the inflation data for the week and expected to creep up and top 12 pct. The expected quarter pct rate hike by RBI next week should also create a minor dampner, though the long awaited positive in the market should brush aside all in its path. Asia is high, global sentiments are back on track, and yes, you have the oil below 125 now as another positive, though it impacts nobody as well as it does the oil companies. BSE above 15,200 seems to be a given, so is Nifty above 4,550 (if you go by the trends of the past few days) with a small down trend as today is the F&O expiry day may also impact the markets, but then as I said yesterday, lets enjoy the mood for now.

Bear End Game ??

So, is everything finally coming in place? The government finally managed to save itself. Oil managed to reach a 6 week low. The US market seems to be gearing up for an upsurge lately. And Asian markets are giving a thumbs up today. To add to all of this, if you notice the trend of our own markets lately, they seem to be suggesting towards a small bull ralley. The reason I say "small" is because I am still wary there may be a few corrections before we can say with a surety that the bear phase has abated. That the world economic scenario looks a bit rosy is no consolation for the fact that things like inflation and consumer sentiments are still low and likely to go down further. Add to it the fact that the sub prime woes are not completely gone ( remember, almost all big US banks have declared huge write downs and have come out with massive losses).

I had yesterday stated that "A few positions made today also maye be erased in a sell off tommorow". Well, it seems that the positions have changed a little overnight. Yes there will most definately be a good amount of sell off but given the changed scenario, there will be far greater buying in the markets today. Expect the BSE to do a 14,700 plus for the day and the Nifty at 4,350-4,380 with a possibility of the nifty just about making it to 4,400 while the BSE may also see similar jump towards 14,800 for a brief while. The stock of the day? of course, PSUs, Oil, Banks, and yes Realty. The dampners of the day? IT probably, solely because the rupee is expected to strengthen today to about 42.40-42.50 range. The End game may see a lot of the intra day positions being unwound, leading to a small decline, but will not be able to hurt the overall positive sentiment of the market.

So, is the bear phase over?? Not yet I believe, but let us leave that debate for the future and enjoy the day.

Mixed signals from the Asian markets, a near negative one from the Dow ( despite better than expected results by financial firms for the quarter) and the political impasse at the centre (India, I mean) bode no good for a market that in the recent past has been amongst the most beaten ones the world over. All said and done, my personal thoughts are that the UPA government at the centre should get a near comfortable majority (maybe around 8-10 votes) and that should propel the markets up. Though the vote will happen possibly late in the evening, a clear picture seems to be emerging as to the fate of the government.

Taking all the above into account, I believe, there may be a good bit of buying effort today not only on the deliveries side but also in the F&O segment too. A few positions made today also maye be erased in a sell off tommorow, in the wake of a positive vote at the centre.

The BSE shold today move for a 14,000 plus scenario and stabilise in the 14,100 to 14,200 region by the day end. Volatility in the markets though is not ruled out ( Not a day to enter the market I would think). The Nifty is seen in a 4,180 to 4,240 range with a likelyhood of both markets making it even higher if the UPA is seen making a comfortable victory. The stocks of the day should be the Banking, metals, PSUs and the fertilizer scrips. The logic solely resting on the assumption of the government staying. Though, the RBI's July 29 date for the rate hike is nearing and may impact sentiments in the bankex somewhat, it will in all likelyhood take a backseat for the day.

Where Now?

Oil touched a six week low and is currently sub 130. The Dow is perhaps stabilised just above 11,000. The market cues though not positive yet, are not overtly negative too. That the Nasdaq closed friday in the negative may indicate a tough day for the IT stock in particular, and the current political impasse. But overall, the current market sentiment seems to be positive.

Expect the markets to open on a positive note. Crossing 14,000 is not ruled out for the BSE. The closure also should be near 14,000 and possibly above it. The Nifty should also open near 4,160 and close near the 4,200 mark. The stocks to take a beating will be IT and the ones to go long indeed are Banking ones. Oil will also see a heavy interest, though overall market may remain subdued in terms of volume for the day. A clearer signal may be had tommorow at the parliament.

Good Signals

The Oil and the US cues seem to be suggesting a hope for a better future of the markets. The Dow ended 207 points up. Asia started in the green but seems slipping now. Oil is stuck below 130. Overall a better day today than most of this year. Good signs I would say.

Expect the BSE to open a couple of hundred points above yesterday and trade in that region mostly. It should ultimately top 13,500 or nearabouts (+-50) by close. The Nifty should open near 4,000 and close a little above it. The only dampners as of now can be the RBI's 29th July rate hike fears and the political jitters. The Stocks to be watched will be Oil and Banks. A good showing on Tech should also continue while Steel and metals may get beaten a little. Overall should be a slightly volatile day. But then, what is a market that doesn't allow for a bit of a volatility.

The Dow closed yesterday 276 points up on the back of a $11 drop in oil on 2 days and a 10% down in 4 days coupled with great news from, Intel, Wells Fargo and the Likes. The Asian markets are also up today between one to two percentage points. So where do we land? Especially with the continuing political turmoil and the impending confidence vote and the Inflation figures for the week also due?

For one, the political turmoil will take its toll, irrespective of the government's fate on the 22nd. Inflation for the week should just cross 12 percent and will dampen sentiments to a good extent. But the opening we may have will be in the positive with a 150-200 points above yesterday, going above 13,000 (possibly 13,100 or so) before settling near 12,900. Watch out for a lot of volatility in the Banking stocks and gains to be made in Tech and Oil. Nifty should open near 3,900 and try breaching the 4,000 mark briefly before settling below it. Amen.

Bungle, bungle, all the way

Way back in January I had opined on the 12,000 mark of the Dow and the impact it may bring if it gets broken convincingly for even a week. (Read my blog http://forexpredictionstoday.blogspot.com/2008/03/quite-in-line-with-what-was-being-said.html ). I had also written about the BSE in my blog on 15th April 2008 ( http://themarketstoday.blogspot.com/2008/04/nervous-signs.html )
And I quote “Eventually.....I stick to my 13,400-13,800 levels to be reached in the coming months although the 14,000 might be a tough psychological barrier to break.” Unquote. Period.

The world has gone for the worse in those couple of months and it seems now that the 13,400 – 13,800 is more of a resistance level than a support (for all the optimists!). The current immediate downside is at 12,500 followed by a further support at 11,600 and 10,500. though my personal belief at this point is that it may be difficult breaking 11,600 if at all. There may be skeptics with their formulas on the 50 percent retrenchment and the likes, but I believe the world (and not WORST) is not over yet. Yes, we have bungled a lot and in lots of places at the wrong times. Yes, Things back home are not that great. And we have lots of things to blame for it. The political saga, the oil saga, the global crisis and so on…. That the RBI is using all weapons in its arsenal to rectify matters is true, but one tends to believe that it is too little too late. Fiscally, we have dug a few small graves ourselves with the Farm loan waiver and the delayed and inadequate decisions on petro price hike. And now you hear of the RBI boldly announcing that things will return to normalcy within 6 months. That, I believe is more akin to acting like an ostrich. Put your head deep in the ground and hope no one will notice your flabby body outside. We as an economy today, are not delinked to the global economic scenario (This one liner that the 10th grader also knows, was for you Reddy Sir). And if economic pundits globally are to be believed, we are in a short recessionary loop of around 2.5 years and starting its timeline in mid 2007. Which actually means we are still left with more than a year upto 2009 end maybe.

So, as I have said above, expect a downslide, that is more and more linked now to the happenings outside as well as within us. Taking cues from not only the domestic political turmoil but also the petro prices and the global (clichéd) “meltdown” (Not to forget the various bunglings at the regulatory and the governance levels). An Oil or political meltdown ( Oil corrected yesterday night to the 138 region) may help in resurrecting the market for a while, but by and large expect a pessimistic market in the days to come. The BSE 30 at 11,600 (on the lower side) to 13,800 is a given with a more stable range of 12,200 to 13,400. The Nifty50 on the other hand should rule in the 3,600 to 4,100 range and more specifically in the 3,800 to 4,000 with a downward bias in both over the week.