Price action in favour of bulls; mkt eyeing Guj election results: Udayan Mukherjee

The Indian equity market has rebounded post a correction of around 400-points and has been rally for the last few days.

Udayan Mukherjee, Consulting Editor, CNBC-TV18 says there is growing conviction that levels of 10000-10100 will act as solid support and market may have formed a higher bottom. December month could tell us if that is true.

However, the important test of that level could come on next Monday when the outcome of Gujarat elections are out but it also depends where we are on that day.

All in all the price action has been fairly remarkable in favour of bulls.

The correction that came in 10-days back because of uncertainty of election outcome in Gujarat and the fact is this uncertainty tells us that there is little bit in the price already that the result may not be that good. If the result is good then there is room for upside and market may make a top above 10500 on Nifty although it depends on where the market is by Friday.

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However, if the result is of middling kind where the BJP wins but not with huge majority then the correction may not be severe. If BJP gets less than 100 seats, there will be correction in the market but may not break 10,000 on the downside. In the unlikely event of BJP losing, there could be a significant year-end correction and that could take us back to 9600-9700 levels of Nifty but it is not the base case for anyone in the market at this point.

Talking about if domestic liquidity is here to stay, he said there has be a scare for the market to correct, otherwise liquidity will gobble up these small corrections. However, one is not sure what could be the trigger for that, it could be Gujarat election, bitcoin crash, North Korea etc., and till then one will have to just stay the course. And till such a trigger or an event plays out, corrections will be modest in the context of the liquidity universe that we are trading at, said Mukherjee.

When asked what did he expect from the FOMC meet this week and if it would have an impact on our markets. He said the Fed have been masters of managing expectations. They have always prepared the markets in advance and therefore usually there is no severe volatility post these meets, since markets are well prepared.

The markets may take the policy action as an excuse to take profits home after having a good year but don’t expect the market to go into a massive correction or sell off after the FOMC meet because the news is out in the open. The US market had a better year than the Indian market.

So, it has been a non-event of sorts unless their commentary is very hawkish for 2018, which also seems unlikely, he said.

Talking about the Bitcoin frenzy, he said he cannot claim to understand the technicality about that but most people may feel missed out. It looks like makings of a bubble and something that may end badly but at what levels, one does not know, said Mukherjee.

He also spoke about Maruti Suzuki, telecom, Bharti Airtel.

For the full discussion, watch video