Robin Griffiths, Technical Strategist, Cazenove Capital Management said that in case of the Sensex, it is trying to build a base around 14,600. He told CNBC-TV18 that it has had a decline of 30% from the actual peak at that level. The level of 14,000 was established last July-August and is a very strong support, he stated.

Excerpts from CNBC-TV18’s exclusive interview with Robin Griffiths: 

Q: What do you see for most global markets now? Does it look like a significant pull back? How much higher can many of these markets go?

A: The rally we have seen in the last few days will start to struggle now because it picks up the tone from Wall Street. Although, it had a good rally, it was quite noticeable that Wall Street is losing momentum.

People are saying that the credit crunch is still with us and one cannot wave a magic wand and have it disappear quickly. Because of that, if most markets bounce too strongly they are going to run into profit taking. 

In case of the Sensex, it is trying to build a base around 14,600. It has had a decline of 30% from the actual peak at that level. Roughly a third down is where you would expect support. Also, the level of 14,000 was established last July-August. It is a very strong support and it would be testing that.

Secondly, some of the biggest stocks in the index like ICICI Bank has already fallen 50% at its lowest. Technically, it is the most important support level that you can have. It is very unlikely to go lower than 50% from the high. Reliance is down almost a third as well. So, I would expect the current rally to have a limited upside right now in the next few days. But if it goes back to the level it just rallied from to around 14,600 to keep seeing the buyers getting the upper hand again we could argue that, that would be where the long-term trend for the Sensex is.

Q: How much more would you give the Sensex in the current pullback on the upside from here?

A: It is making an overall pattern of falling highs and lows below falling moving averages and the 200-day moving average (DMA) is pretty dominant, which is at 17,219 at the moment. But there is resistance before we get there. Around 17,000 is where the upside is limited for the current rally.

If we go down and retest the lows, I would expect to see good buying at that level. So, it will be building a base.

Q: What do you see on the charts of Dow and S&P? They have both rallied 6-7% in the last one-week. Do you see more upsides there or do you see a retest of the lows?

A: I see more upside for the Dow because of the nature of that Index. It is so full of resources and stocks like General Electric, which benefit from the weakness of the US dollar.

In the case of S&P though, the resistance is clearly at 1,400 and it is 1,350 now. It can certainly get to 1,400 and I would expect it to struggle again. There is a likelihood of one more retest towards where we have just come up. It is in a range between 1,270 and 1,400 at the moment. We are getting towards the top of that range.

However, in the second half of this year, by which time the Fed would have acted again and the credit crunch will be further through, we can expect a much more solid and sustainable rally. Indian market will benefit from that background as well.

Q: At what level for the Sensex would you make the conclusion that the market might be regaining strength and this may not be just a pullback or a temporary pullback in a bear phase or a downward phase?

A: In round numbers, I don’t think it’s going to go under 14,000. I would expect it to build a significant base from which a long-term bull trend will resume.