Market still dull, hopes of year-end rally dim

The markets may not see a major recovery till the year-end as lower participation and absence of shorts in the system would prevent any kind of a sharp pullback.

The markets on Monday got an IIP shocker that sent the benchmark index crashing by 343.11 points to close well below 16,000.

“Indian markets have been underperforming other markets as there are a lot of negative factors at the local level. The recent IIP numbers just reinforce the belief that we are in the midst of a slowdown in growth. The fiscal deficit situation and the weakening rupee have also added to the woes,” said Deepak Jasani, head of retail research at HDFC Securities.

Though markets have now lost over 1,000 points in three sessions, experts don’t see a major technical pullback as investors’ interest seems to be dwindling.

“There is very little interest among investors right now and the base for Nifty has shifted downwards. Rather than shorts, we are seeing unwinding of long positions by investors at the moment which indicates that there won’t be a sharp short-covering rally this time around,” said Monal Desai, vice-president and head - institutional derivatives at Prabhudas Lilladher.

Experts see the current week to be crucial for markets in terms of how foreign investors position themselves ahead of their year-end holidays. “The only positive factor in the near term which may lead to a material bounce-back would be RBI’s stand on or before Friday. If they cut CRR or engage in monetary loosening, we may see markets reacting positively, else we would continue to trade flat to negative with small bounces thrown in. The next few days till Friday would be quite volatile and FIIs would probably take a call by then on whether to reduce their positions or not before they go on year-end holidays,” said Jasani.

Low participation, on the other hand, may also prevent any major sell-off in the near term, unless something really bad news flow strikes us, say experts.

“Sentiments have been quite battered and we are unlikely to see a sharp bounce-back even if the RBI does announce a CRR cut which some people are hoping for. Markets may hold on to 4,650-4,700 levels in the absence of any negative news and low year-end participation by FIIs,” said Ambareesh Baliga, chief operating officer at Way2Wealth Brokers.