Mkts could see relief rally on +ve Big Tech nos

Many variables could change this week. The biggest one, which has been the talking point in the market this week, is whether all that has been happening around the world today is indicating or heralding, in some way, that crude is about to give you that much awaited cool down. Everybody has gone wrong in calling crude. So, let’s not fool ourselves that this is a done deal yet. The way some of the metals have been cooling off for the last few days, is probably indicating that this is just one commodity that is hanging out there in a world on its own and everything has started falling off very sharply.

Do note that oil stocks are correcting meaningfully in the West. Oil rich markets like Brazil have started correcting quite a bit. Maybe it is a prelude to what some of the oil owners out there are feeling about where crude might be headed in the near-term. That is trigger, which is not quite conclusive. We are only guessing, but anticipating and hoping.

There could be a situation where politics next week gives a little bit of relief to the market. The Left might withdraw support and the government could cobble through a coalition, and avert or postpone the crisis for the moment.

Towards the end of the week, big technology earnings like Infosys should start coming in. If the numbers are good and the market feels good about earnings, then that might lead to a little bit of relief rally.

All of them, none of them, or maybe a few of them might play out next week. They might all be triggers in perpetuating. But what we are expecting right now is a bit of a relief rally just for the moment.

There are serious headwinds in the markets. Bond yields have crossed 9% this week. The bond market is a better reader of what the interest rate signals are. They are probably suggesting that RBI will move again with interest rates with the kind of inflation that we have.

So, these are all the possible things that can derail any nascent pullback in the market. Friday’s move up was not lead as much by short covering but by genuine accumulation of some beaten down stocks. If for some reason next week, there is some good news from any of the quarters that we spoke about, it is possible that the Nifty clings on to 3,850 as a near-term base and attempts a journey to 4,300-4,400 kind of levels. If factors are good then it could head maybe higher, because we haven’t had a 10-15% kind of bear market rally after last time, when the Nifty rallied 20%.

So, bear market rallies do happen in bear markets. All that one is saying is that such a possibility exists at this point. If that were to come about, would we rejoice and say the bear market is over and now we are headed our way back to 6,200. Absolutely, not. We would only say that the bear market pullback was coming, and has come. Maybe it takes us a bit higher. But eventually the possibility of breaking those recent lows certainly does exist and looks very likely. But maybe an oversold market might give us a little bit of bounce.