Don't see mkt breaching 12k levels: Orpheus Cap

Mukul Pal, CEO, Orpheus Capitals said the key inflection point for the Sensex is at 12,000. "We don’t think these levels are going to be easily penetrated. The market has retraced more than two years of gains without a multi-week serious bounce."

Excerpts from CNBC-TV18's exclusive interview with Mukul Pal:

Q: How are the charts of the Sensex and Nifty looking at this point? Does it look like there is a bottom in place or would there be a long bear haul or a long lean patch?

A: I do not know what a long bear patch means because bear markets are good times to trade and make money. So, there is always going to be market volume and trade will still happen.

We see the Sensex key inflection at 12,000 levels. We don’t think that these levels are going to be easily penetrated. This is our first target at 12,000 where we see at least a multi-week bounce from these levels because these are not only one-year lows. They are more than a year’s lows but are May 2006 highs also. So, the market has retraced more than two years of gains without a multi-week serious bounce happening and this is our first inflection point.

From the global cues and other inter-market assets that we track, we feel that there could be a possible cyclical low extending till October. This could easily push the main bluechip indices and other broad indices about 10-20% lower and some weaker sectors about 30% lower from here.

Q: At current levels, would you advice people to buy? Do you think that they could wait for another 5%, after all we are still some 800 points from the 12,000 mark? Would you have people wait and then wait for that bounce and when that bounce comes how much good is it to go? Do you see it go to 15,000-17,000?

A: The markets worldwide has polarised performers. As far as giving a mass buy view to people, those sort of stories are over. One has to be able to understand their sector, sector leaders, outperformers from the sector and what economic stage we are in to buy those stocks that will perform relatively or will conserve our capital.

If we look at the market sectorally, one can get ideas. We have been mentioning about pharma and healthcare and IT in a long-term bear market does show some strength to hold up and has the ability to conserve capital.

If you look at pharma stocks worldwide, Merck and Johnson & Johnson have outperformed Pfizer. Though they are from the same sector, Pfizer has been going down and Merck has been going up.

Even technology like HP and IBM are near new highs and Microsoft and Intel are still at their lows.So, it is about an understanding of sectors and sector performers.

We have been extremely positive on the materials sector. This commodity boom is far from over and materials sector is going to go up for a few years.