Q: Your thoughts on a couple of those stocks which got pounded yesterday stocks like Tata Steel, and Sterlite. What do you see on those metal charts?

A: I think if you look at the metal index over the last 2-3 months its slowly been getting weaker and weaker and I think if you leave out the other stocks which are already been beaten down and just focus on Tata Steel and Sterlite, it was expected that sometime or the other this was going to give in for two reasons. One is with the rest of the market having corrected so much, and even the other steel and metal pack these were the only two stocks relatively in terms of performance were probably only down 20% from their recent highs.

So somewhere down the line when people had to offset or balance their portfolios where they have taken a pounding and book profits somewhere, where they are making which was finally coming down to Sterlite and Tata Steel. What happens in the cycle of asset classes’ first bonds correct, then it is equity and last its commodity, so may be the way crude is moving up Cairn India is not moving up. May be people across the board are feeling that the commodity cycle is somewhere near the peak.

I think this is an anticipatory sell off that something or the other, and commodity has to cool off and then these stocks would correct, so I think market is expecting in anticipation. Given the trigger of yesterday with steel producers being told to cut their prices of some of those pipes by 10%, may be that was the trigger. Level wise if Rs 634 is broken on Tata Steel which is a major trendline then it is headed towards Rs 588 and Sterlite is now headed to closer to Rs 595.

Q: The other problem yesterday was that aside from being a bad day, the swing back or the swings within the trade were pretty high, is this a good time to be trading Nifty or would you avoid that in the near-term?  

A: Volatility does take out traders but in this kind of volatility unless you can keep a deeper stop loss there is no point trading because if you keep smaller stop losses they are going to be triggered in either direction.

If you are long only then 3,848 is your stop loss and if you are short, the guy who wants to cut the last would probably say that I will cut above the bullish candle of Wednesday when you had that big move up, and 4,107 was the high. The last guy to cut on a short would say that is the level, for me 4,020 would be the trigger point for both shorts and longs where you would go long above that or cut your short.

But for a long only guy, a 3,848 should be the deepest stop loss and I don’t think one can keep small stop losses and trade. I think the earlier signs of some bottom fishing are coming in. Banking and capital goods index per se are at major support levels, so you could see through the day the BHEL and Larsen and Toubro were picking up even while the market was cracking. Leaving out the private banks which are getting hammered, I think the PSU banks the earlier signs are there, one saw buying in Bank of India, State Bank of India, Bank of Baroda, so there are stock and sector pickings going on even on days when the market is getting hammered.

That may be the earliest indicator that some guy is still finding value out here, even though we don’t know whether 3,848 is the intermediate trading bottom.