Vijay L Bhambwani's Ticker: Nifty heading towards a decisive phase

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 bulls would have to do some significant work to push markets higher.

Read last week's piece here. That was because bulls appeared lethargic and cautious about enhancing their commitments. As the end of December approaches, the window of a ‘Santa Claus’ rally is fast closing.

There is hope for bulls, as the statistical data suggests that markets can still rally. As the festive season approaches, traded volumes will shrink along routine lines as participants are away for Christmas and the New Year. It becomes easier for smart money and large players to influence prices with relatively small efforts, as markets lack depth.

While the sustainability of the move remains an open question, a one-time price move can be attained. Last week, I wrote about the US Federal Reserve's 0.25% rate cut being a positive trigger. On the other hand, the Japanese central bank raised coupon rates by 0.25% to 30-year highs.

That is a negative trigger for emerging markets. That is due to the cash carry trade. Japanese money was one of the cheapest in the world, and global traders borrowed from Japan at lower rates to invest in overseas markets, which offered higher interest rates.

This ‘cash carry trade’ resulted in bull markets in many regional markets. The Bank of Japan's rate hikes threaten to unravel the carry trade over time. With these fears persisting in the undertone, bullion continued to surge higher.

That is a sign of safe-haven buying. The long-term outlook for patient delivery holders remains optimistic. I continue to warn my readers