A bit of a down day for largecaps but midcaps did extremely well. And today all eyes will be fixed on that midcap screen, what individual stocks can do, what stocks like RNRL can do for traders because the broader markets is a bit starved off momentum and flows have dried up a little bit not too much by news flow either because we are in November not October.
This is a very different kind of market that we have out here, compared to what we have seen in the last one month.
Rough for the largecaps:
A bit rough but flows have dried up quite a bit so you can understand why the market is sapped of momentum. The big dollars are not coming in therefore the big stock are not moving so it’s a bit of a retail party going out there so forget the big ONGC, ICICI Bank’s of the world and look at the midcaps which is where all the action is.
I suppose we will see more of that today but over all we seem to be in a bit of range now, no break down has happened, no break out above 20,000 has happened either so we are just about trading in a bit of a range
Asian Indices:
It is quiet morning across Asia but generally in the green so no problem. Yesterday was the bad day for Asia today is much better Nikkei is up 0.35% even Hang Seng’s bounced back from morning losses last couple of day’s have been pretty bad for Hang Seng now up 1%, China is still down nearly1% but Straits Times and Taiwan are holding out.
No problem across Asia is much stable then they have been in the last couple of days.
Markets this morning:
I think still range bound; would be surprise if we have a major move. Last couple of days the market looked a bit sluggish so its entirely possible that the market drifts down a bit more at least as reflected in index but nothing which is suggesting that hell is about to break lose- can we go back to 19,000-19,200 levels? For sure, that’s small change for the market 500-600 points can go anytime. But beyond that its difficult to build a scenario for a major correction from here, difficult to build a scenario for the markets running away on the way up because flows have dried up a bit. So I suspect we will too and fro in a range, the action will become stock specific and that’s pretty much what we have seen yesterday as well.
I don’t think we are in for an existing time right now unless something changes globally over the next few days and the market gets pegged back there is a lingering fear of a slightly deeper cut in the market for a lot of people but the markets always surprised us in the way up and with resilience with last many months so I suspect till it is broken we will not say that its about to break. All one can see now is stock specific action and maybe range bound markets.
I think the action in the Nifty will probably die down a bit like we saw yesterday. The Nifty did not account for a large part of traded volumes because in a range bound market the Nifty is not the favoured place to be and I suspect that one will probably see more of that with a Nifty maybe to and fro in a 300-point kind of range.
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Will the dry patch of liquidity impact sentiment:
It is already impacting sentiment in the largecaps because while there is no heavy selling, I think there is lack of buying for the market, which is fed on a diet of USD 4-5 billion a month, suddenly to see up to USD 200 million sell figure followed up by another Rs 1,100 crore provisional sell figure, consistent selling on the margin on the future side as well is not very comforting because you are coming on the back of very strong flows over the last two or three months and suddenly you are learning to live with fairly moderated flows that I think is causing discomfort in the largecap universe.
So you know the traders, the operators and the HNI’s are saying if the big money is not going to come in and drive up this largecap valuations even higher then do I need to just move out of this space for a bit let them come for the largecaps in time and I’ll get back to the largecaps but now I think I just need to take my eye off the Nifty and get to those smallcap and midcap stocks which will probably give me better returns in the near-term.
Having said that we still need to monitor what the FII action is like over the weeks because we have seen a couple of sell days. Hopefully there will not be too much by way of global volatility induced selling because that might be a bit hard to digest. It comforting to see that domestic institutions are still buying so you could easily have a situation like you saw few months back where the FIIs just take off little bit of money and the DIIs who have been sitting on the sidelines probably soak up some of those largecap supply, which would be okey and it will make for a range bound market but not too much of downside.
Is it good idea to keep playing the midcaps?
That’s what people will do at this point in time for sure because the landscape has become a very retail HNI oriented landscape right now for the next couple of months. The smart guys are saying lets now play with our small boys, because the big boys will comeback probably in January when the FII money starts moving again, registrations move on. It’s easier to get over this P-Note hurdle and comeback in a cleaner way.
I suspect now it will be easier for the midcap guys to move around. You will probably see some out performance because in the last few days since that 2,000-3,000 thousand-point rally on the Sensex happened, the market had got quite narrow. And in that sense you had seen a little bit of a gap opening up between some of the good quality midcaps and the large caps. That probably will get breached a little bit now, unless there is a bigger fall in the market. Upto 19,000 its fine and 1,000-1,200 points nobody cares about nowadays from these levels, 7-8% correction is no big deal in largecaps.
So till that markets fine, everybody will say we are range bound and we will do midcaps. If the markets fall more than that and you see a bigger than 8-9%, 8-10% cut in largecaps, then the picture might change, because usually does not happen that largecaps are continuing their correction and midcap are darting away continuously on the way up, that divergence does not last beyond a point.
There’s one another thing on stock futures, while retail and HNI’s engaging in their own small party in midcaps, stock futures are getting probably a bit overheated, we are at Rs 56,000 crores in stock futures open interest that’s 75% of overall futures positions right now. So you can sense that, there is interest but I think we are slowly getting to that point where the margin of safety in terms of midcap technicals is getting eroded a little bit.
So you keep your fingers crossed and say okay we play the party but if something goes wrong, which we cannot see today then I think stock futures are positioning themselves for a bit of a dent and of course selectively in many stocks there seems to be an appearance of a few bubble like valuations too in midcaps.
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