Vijay L Bhambwani's Ticker: Bulls need to do heavy lifting

Subscribe to enjoy similar stories. Ticker is a weekly newsletter by Vijay L Bhambwani. Subscribe to Mint's newsletters to get them directly in your email inbox. Dear reader, Last week, I wrote that a weakening rupee was casting a shadow on bullish sentiments.

A ‘Santa Claus’ rally was possible only after the Nifty closed sustainably above the 26,325 threshold. The bulls failed to meet this precondition, and the markets surrendered ground for the second consecutive week. The rupee slipped further against the US dollar (which ironically was weakening itself) and unnerved bulls.

According to media reports, leading bankers have assured big-ticket depositors that fixed deposit rates will not fall despite rate cuts, which means the cost of funds will remain elevated. Easy and low-cost money is mother’s milk to a bull market. Turn off the money tap, and asset prices tend to slide.

The US Federal Reserve announced a rate cut, which limited the decline in our markets, but the selling could have accelerated. Cash carry considerations (borrowing from low interest-yielding nations and investing in higher interest-yielding nations) kept hopes alive for emerging markets. Falling oil and gas prices also helped cushion the declines.

The window for the ‘Santa Claus’ rally will close shortly unless bulls manage to lend aggressive buying support. This week, we are likely to see bullion remain buoyant, as long-term prospects remain bullish. As long as you can digest the short-term volatility, the prospects remain positive.