Mkt could re-test previous lows if 4,900 is breached

Excerpts from CNBC-TV18's exclusive interview with Ashwani Gujral:

Q: From a trader’s perspective has the trend changed for the market since it closed below 5,000?

A: If we believe that institutions determine the trend then for the last few days the way institutions are selling it becomes obvious, which way the May trend is. On Friday 5,040-5,050 was a key levels and then finally 5,000 because that was a psychological shift, when such important levels break and the bounces are not sustaining even for half a day, then it becomes clear that one needs to bet on the short side.

Now this market needs to recover 5,090 to about 5,100 for us to say that okay some sort of rally has again resumed, otherwise 4,900 is the last level if that’s taken then the retest of the previous low becomes eminent.

Q: If the call is that the market is looking a lot weaker now, would you still open up fresh shorts below this 5,000 mark or would you want to wait and watch for a bit on this one?

A:  I think a weak pull back may try to get above 5,050 in case any sort of gap up opening or some sort of pull back reaches 5,050 that’s a good place to get back into shorts.

The key thing was that the oil stocks, which were holding up this market have started breaking down on Friday the way RPL, Essar Oil and Reliance have moved, it shows that the final bastion is also now crumbling and if oil stocks starts crumbling then this market really has nothing to hold it up.

Q: How would you play the Nifty if we had a quite opening this morning or one which signals some sort of downside?

A: SGX indicates that we are going to open 26-30 points and we will scale back over 5,000 and so any attempt over 5,000 becomes a great shorting opportunity because the way markets have broken down from support of Friday, I think there is weakness and we will see lower levels around 4,900 before any sustainable bounce back occurs. So just on any gap one should short the market.

Q: Technically how are these stocks looking to you at this point of time particularly after the slam down on RPL on Friday and Reliance Industries what’s the call on these stocks?

A: Oil and gas has started taking a hit on Friday. RPL now has a very strong support around Rs 175-180; in case that gets broken down you could retest the Rs 140 kind of lows that it had hit earlier.

 Reliance Industries it was a strong stock, it was beginning to show nice uptrend. Now it’s likely that it could go back to test the Rs 2,400 kind of support and it will get back into an uptrend once it gets past Rs 2,620. But the important point here is that the large stocks on Friday have fallen on very heavy volumes and that indicates that on big stocks institutions are selling, and that’s never a good sign for any markets.

Q: Just to play it from the other side though, the market rallied above 12.5% in the clean 6 weeks that it closed up in the green. What convinces you that this not a level to start accumulating or making fresh long positions at sub 5,000?

A: If we hold on to 4,900 and slowly start recovering back above 5,000-5,050 probably this was just a correction but the way institutional figures are indicating that the way up, we didn’t find any large FII buying or institutional buying but on the way down everyday they are coming up with Rs 600-800 crore in selling, that sort of indicates that probably the real rend is on the downside.

Otherwise the support levels should have held on 5,050 and 5,000 was a key psychological level if we were finding buying out there and we did see on Friday some sort of a pull back had happened early in the morning but that never sustained, we never even went back above 5,100. So that indicates that all pull backs are getting sold into on the upside, once that starts happening and lower levels starts breaking down then you have your bias on the downside. 

Q: How do ITC and Bharti look on the charts?

A: Bharti Airtel seems to be having support around Rs 800-Rs 820 and it really needs to get past Rs 860-865 but it is probably now looking stronger than the rest of market but clearly with the rest of the market it could  be expected to retest that Rs 800 level again

ITC has strong support around Rs 190-193 and if we can buy around those levels in this sort of a wobbly market, ITC could be a good bet and over a period of time one could find levels of Rs 225-230, so it’s in that kind of range and FMCG is a sector where a lot of defensive buying could happen.

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