All HOPE is in the price

Deepak Singh - Market Analyst, State of the Market

April was a great month for Global equities, as most of the markets across the globe rallied hard to everyone's surprise. By now, most of the Global equity markets have rallied more than 10% from lows of the year. Nifty is up more than 16% from the lows of 4480 - it touched on March 18. Even a low volatile index like S&P 500 has rallied more than 11% from the lows. Analysts are offering a simple reason for the rally - "All bad news was in the price". Remember, the rally in Global markets started just after Bear Stearns declared bankruptcy in mid March. And there was a feeling - it cannot get worse than this.

But now markets are no more value play and are trading at reasonable levels. So, the question traders need to debate - where do we go from here considering "All HOPE is in the price". (I am using this phrase because I cannot say - All good news is in the price). At best we can say - Thank God, World is not coming to an end.

There is no doubt that recent Global markets behaviour has reduced the anxiety and panic that prevailed in financial markets, as well as real economy. It does not mean that worst is over as far as economic data points are concerned. Market may continue to receive more doses of bad news be it write downs, layoffs, food inflation, slower economic growth - but market reaction from now on, might be little mature to such data points. The hope is that conditions may not get much worse from here on, but it could be a while before they get better.

As a result, the probability points to a more sideways trading market as market digests all the data points - good, bad or ugly and then take a call from there on. Bottom line - Market needs time to decide. As a trader, it means we may continue to see a stock specific market. It seems next few weeks and months, the success will hinge on being selective in bottom up stock picking. 

Market hates ugly surprises; and one should keep eyes and ears open to such surprises because surprises tend to move market in a violent way. Else be ready for dull boring market on an overall basis but traders can spot exciting niche stories.