A certain sense of ease may be in the air as investors and traders get back to work from the weekend. After a torrid week, nerves would have settled a bit. The political situation seems to have eased for the moment, so much so that it’s moved from the newspaper front pages to the edit columns.
That’s exactly what the markets would like: let this issue be reduced to a long drawn out debate without the teeth to unleash any immediate damage to the government. Every statement from the Left, since the Friday press conference, seems to have progressively diluted its hard stance. Just as well.
The bigger relief is the way global markets are tearing ahead. While we were busy grappling with the problems at home, it may have gone unnoticed how smartly global markets have bounced back. Not just emerging markets, but even the US. Whether this is an equity rally pre-empting a Fed rate cut on September 18 one isn’t sure, but volatility has indeed reduced considerably in the last one week. This paves the way for us to catch up with our emerging market peers this week. We have under performed because of the political noise and if global markets are supportive we should outperform now. Unless there is some serious global shock again, a move to 4,300-4,400 for the Nifty shouldn’t be too difficult.
The medium term is still quite difficult to predict. It would have been comforting to be able to predict with certainty that the markets are moving out of the hyper news flow zone. Economists and global commentators still warn of difficult days for the US economy later this year. Yen and liquidity watchers are not sure we are out of the woods quite yet. Some cheerful brokerages like Morgan Stanley are predicting a more pronounced earnings slowdown in the October quarter. It may also be wishful to assume that Prakash Karat will speak in soft tones for too long. The walls of worry remain, but then that’s typically what bull markets climb, don’t they?
(The writer is Executive Editor, CNBC-TV 18)