BERNANKE GIVES THE BATON - MARKETS RUNS LIKE MILKHA SINGH!
By Ruma Dubey
It is the mind which interprets the world. And looks the collective minds of all on the markets have decided to interpret good times for now or should we say, for today?
We all apply so much science and logical thinking to the markets, looking at fundamental and technical angles and on days like these, we realize that ultimately it is all about sentiments alone. It is mood swings which decide a bull or a bear theme for the markets.
Till yesterday the moods were despondent, lackluster but suddenly today, there is a turnaround, all because Bernanke said that Fed’s easy-money policy is still necessary as jobs market remains weak and inflation remains too low for comfort. Well, market is celebrating and rejoicing this statement. Sorry to pop the balloon but the fact still remains that Fed will start tapering Quantitative Easing (QE) by the end of the year. And as he had said before also, the word is “tapering” not a complete halt. Slowly but gradually the QE is bound to stop; rather it has to stop.
So celebrating on this statement of Bernanke is being short sighted and naïve. Yes, we can be happy about RBI making moves to anchor the falling rupee against the dollar. That is a good move and yes, that has to be celebrated with a jump in the Sensex.
Yet, all structural pains continue to remain. Before Bernanke’s statement yesterday, we had a lot to worry about, most important amongst them being politics, which has taken centre stage and is holding the entire country- its people, its economy to ransom. The ill conceived Food Bill and complete apathy to the economy is playing out on all facets of the economy. Tomorrow we have the IIP numbers and the CSO has changed the timing of the announcement from morning 11 to afternoon 4. This, CSO says, is to ensure that IIP does not create havoc on the markets and hence the decision to announce henceforth always after market closing. This is like isolating the symptom without paying heed to the cause of the disease. Retail inflation numbers will also come in at 4 PM and that will give us an indication of the roadmap which RBI could take. The First Quarter Review of Monetary Policy for 2013-14 is scheduled for July 30, 2013.
Expecting inflation to taper off would be wishful thinking. Fuel prices are up and that alone is enough to cause all-round inflation. For the man on the street, cost of living is stifling the life out of him. Monsoon will ease price of food but the impact of falling rupee and rising fuel prices is bound to leave a telling effect.
We will start the day with Infosys Q1FY14 numbers and this time around, expectations are muted, which is better than heightened. Infosys is no longer the bellwether stock and it cannot alone swing the moods into the negative. Yes, it has the capacity to sour or sweeten the sentiments. If Infosys springs a very bad shocker, then probably it would percolate to all the other stocks. People are expecting the worst hence we could be taken by surprise. Guidance will be the key factor to watch out for.
A rise in the market never hurts but what will hurt are high expectations. A rise which is based on pure assumptions and hypothecations is like a candle in the wind, do not know which gale of wind will blow off the light. Today the same things which had looked dim two days ago, look extremely bright.
It is best to exercise extreme caution at this juncture. When a person is highly emotional, he says and does things which defy all good sense. Ditto for the markets. It is riding high on sheer sentiments as the ground reality remains the same.
Keep an eye on the earnings and bank on individual stocks.