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(Interview Transcript)
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Sushil Kedia, Head- Institutional Equities of K&A Securities said that the Nifty has been weak since the begining of the day. He believes that should the Nifty test levels below 5090 it may bounce back to the 5170 level in the next 15 to 20 minutes. He sees 4,970 to be a very tight support area for the next 3-4 days.
Excerpts from CNBC-TV18's exclusive interview with Sushil Kedia
Q: What is the Nifty picture looking like first?
A: Nifty has been weak since the open and for the beginning of the day it is a little overdone. If it breaks below 5,090 it confirms a short and until that happens it is possible that from somewhere in the next 15-20 minutes it should produce a bounce back which can’t be ruled out to go as far back as 5,170 or 5,180. If it goes there it is clearly a short again at those higher levels. So waiting for either a pullback or wherever that pullback peters out or a slip below 5,090 to short over the next 3-4 days it is likely that 4,970 should come before 5,170 is taken out. Around the vicinity of the 4,922-4,970 range, the consolidating pattern should get over and the market should thereafter be good for the 5,300 levels.
Q: For this week what kind of range are you working with on the Nifty?
A: 4,970 for the next 3-4 days seems to be a very tight support area and given how markets will pan out now, if 5,170 is taken out I will forget 4,970 also. But so far it looks 4,970-5,170 for the week and thereafter expansion of the range on the higher side to 5,300.
Q: What are the global charts looking like to you if you look at the Dow, the Hang Seng what signals are they giving you or the S&P whichever you track?
A: The last two-trading sessions on the S&P have formed narrow body candles, yesterday was an inverted hammer or a gravestone dodgy, the day before it was a hanging man. These sort of pattern that tends to come around when the markets are running into a resistance territory, when there is a prospect for a reversal. Until a good down close comes on a one-day basis these are early warning signs. These signals come under a level of 1,439 to 1,450 area as a very serious resistance level. It came on a day when, the second consecutive unexpected monthly rise in the US’ leading indicators comes by to strengthen the thesis that the recession was either a very short-lived one or perhaps there is no recession at all. The bad news is that the stock market itself is the most significant indicator of all indicators. The markets have had been going up within this regime of muted fear.
Q: How are the charts of some of these technology stocks the frontline tech stocks looking to you and how would you trade them?
A: For an investor the trend is clearly up on them but these are not the stocks to go and buy at this moment. Pullbacks are clearly possible on them and certainly not worth shorting.
Q: How is the rupee-dollar chart looking like to you now?
A: The dollar in terms of the rupees went up too high and too soon. The nature of the fundamental assessments is in general lagging and we anticipate the dollar to stand at Rs 44. But looking at the structure of this price move and the serious overbought zone, it is in a pullback which maybe as sharp and may go back down to 40.50 or maybe even 40. It is too early to start playing for it. Maybe the next three-four days will give us reversal signals to very short-term traders. This is despite the depth of is still to be termed as a pullback and perhaps wherever this pullback subsides. The rupee is good for 44 over say the next two-two and a half three months timeframe and maybe this entire pattern will take about five-six months. But this is the story for the short-term this is not a real long-term reversal in this strength of the rupee. This was a correction which was really overdue for a long time and the more it got delayed the more was the strength or the vociferousness with which this has uncoiled. But wherever this ends in four-five months, I think taking about 18-month view I don’t find it courageous to say that rupee is still good for 32.
Q: Just to get back to you on the space that is being looking strong which is the metals any long-short combination that you are playing over there or is the whole pocket looking good for more?
A: Most of the pocket is, except for SAIL sort of gone overbought in the short-term. Some stocks like Hindalco have been having these swinging trading ranges and these swings are so deep that it is a trading pattern. But from all of the combinations possible what looks attractive is going long on SAIL and shorting Tata Steel. At the beginning of this year the ratio of one stock of SAIL divided by the Tata Steel price was about 0.32. It came down to as low as 0.20 last week. Today it is perhaps at 0.21. This ratio may go back to about 0.26, that is still about a 25-27% kind of a gain over a period of next 8-10 weeks. Within the individual components of this pair trade (SAIL and Tata Steel), SAIL has this resistance past Rs 196. It needs to go past that, and if that happens SAIL will go up, far more than Tata Steel will. But looking at the chart of Tata Steel it is looking toppy. So we might see a scenario where Tata Steel goes down far more than SAIL goes down in the short run and maybe thereafter in the next rally SAIL may outperform. So that is one interesting pair trade out there.
Q: Quick word on PSU banks and how those charts look State Bank of India (SBI) or any other PSU bank chart that you track?
A: SBI and Indian Bank are the two charts, that are making very interesting formations that are highly potential reversal points. It is a little early to put out targets on them but once this reversal gets confirmed over the next several days it is quite possible that you might see the State Bank of India going past Rs 2,000 before going below Rs 1,500. Similarly the Indian Bank might go close to Rs 200. So these are kind of zones these two banks are looking at. The other ones don’t have such a clear picture as yet, maybe one should give them another week or ten days to make more clearer patterns.
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