Jai Bala of cashthechaos.com said there is nothing to prove that there is a trading bottom in the Nifty. He told CNBC-TV18 that it is best to stay on cash and wait for a rise to short the market. 

He is against the view that long-term investors should get in right now. “If you invest right now, your money is going to work negatively. There is no point in blocking your capital. Let the market form a base and put in your money, which will work effectively and quickly once the bottom is in place.”

Excerpts from CNBC-TV18’s exclusive interview with Jai Bala:

Q: What is your sense of the Nifty right now? It is at 4,275. What would you do on the Index?

A: There is nothing yet to prove to the effect that we have a bottom or a trading bottom in place. The best thing at this moment would be to stay on cash and wait for a rise to short the market.

Q: There were some technical analysts who believe that after crossing or breaching 4,400, there aren’t any real meaningful technical supports. Would you share that view? Are you sensing any support at any lower levels?

A: If we go back to our February entry, we have a target on the Nifty for about 4,200. We are pretty much close to it. The low that was made recently was 4,225. That is a good support, provided we have a follow through. We have not seen a meaningful follow through. If we have one, we will be looking for a base formation at this level. Until that point, it is foolish to try and do bottom fishing at this level. So, it would be sensible to wait for a bottom formation. Tops are typically formed whereas bottom formation takes time.

There are multiple items to break the bottom and when the bottom holds, they will give you enough opportunity to know that the bottom is in place and will be over a span of several weeks.

Q: Speaking about bottom fishing, stock wise are you getting a feeling that this kind of a bottom is formed anywhere at all?

A: It is not a rocket science to know that all the stocks have been beaten down. But the point is are you going to be a trader in the market or are you trying to be a sensible investor trying to protect your capital. If you are a trader, then there is a trading opportunity. But if you are an investor, then it will be sensible to wait for a meaningful base to form and then put in your money.

I am against the view that the long-term investors should get in right now. If you invest right now, your money is going to work negatively. There is no point in blocking your capital. Let the market form a base. Put in your money which will work effectively and quickly once the bottom is in place.

Q: If you short the Nifty right now, what is the kind of downward target that you would quote on the index? What would be your call on Reliance industries?

A: If we short the market at this moment, I am assuming that 4,225 is not going to hold. It will be only in that situation that I would be shorting the market. If that is going to be the case, I see 3,800 coming up and hold in a span of a few months.

Reliance has broken a long-term trendline at Rs 2,160 and could potentially hit Rs 1,800. But there are some supports and we are looking at probably about Rs 1,970 or close to Rs 2,000, which would be a near-term support. The resistance for Reliance at the moment is at Rs 2,150. So, if you had to short Reliance, you would have a stop at Rs 2,150 and look for Rs 1,975.

Q: Can you give us the technical levels in a couple of other liquid stocks like IFCI or JP associates?

A:  IFCI still has some downward room to go, but being a liquid stock and small size, there would be a temptation to bottom fish. If the low of Rs 45 goes, then there is no stopping for the stock up to Rs 38 and the resistance for the stock is about Rs 53.