There's a sense of deja vu in the market this week. It seems so much like the December blip. We had an interest rate scare, too, then, which sparked off a sharp 1,000 point fall.
And then it bounced right back to new highs. This week too, the sensex slipped about 900 points from its high of 14,700. Now it is showing strength again. It would be interesting to see if it does an encore next week and cruises to new highs again.
Yes, some worries have emerged of late. But the market's reaction to these has been interesting. It seems to be conveying that while it is apprehensive about the changing macro environment, its not ready for the big dip yet.
Which is why we saw the resilience. Despite a fairly negative newsflow, the Nifty never broke 4000 decisively and then bounced back with gusto. Now whether it is the seasonal element of pre-budget fervour or something else is unclear but the bulls are strong. And reasonably in control. Therefore, the big correction may just be postponed for a bit. It will come though. So one shouldn't be complacent. But maybe there will be a pre-budget rally after all.
What is helping is the global sentiment. Most global markets are still in a bullish groove. US Fed chairman Ben Bernanke's statements on easing inflation, a recovery in the housing market and possible interest rate softening is music to the ears of risk lovers. There's no visible shrinking of risk appetite for emerging markets at all. Globally linked as we are, if emerging markets remain strong, corrections here may be sharp but shortlived. As we have seen the last couple of times. Something tells me that the big correction will need a global trigger. This camel is strong, a single straw can't break it's back. It will need a bunch.
Next week is going to be interesting. Futures traders will be rolling over to the March series, which will have to be a budget call. Importantly, there are 3 trading sessions in the new series — 23,26 and 27th of February — which are pre-budget. Short term traders will probably roll over keeping those days in mind as after that the event will determine the trading view. Near term traders will probably trade long now. But do hedge before the budget. Better to be safe than sorry.
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