Mar 23, 2013 03:58 PM IST | Source: CNBC-TV18

Expect intra-day rallies; traders remain on short side

Yesterday, our market attempted some rallies but it just could not hold and we had a disappointing day. We closed at fresh 2013‘s low, which is not a good background to start a session.

Indian indices attempted some rallies on Thrusday, but just could not hold and had a disappointing day. It closed at fresh 2013’s low, which is not a good background to start a session.

Global markets too have not helped, the US market was down quite a bit and the SGX Nifty suggests our market will not make a headway recovery today morning said CNBC-TV18’s managing editor, Udayan Mukherjee.

For now, the traders have no option but to remain on the short side maybe with a slightly deeper stop loss because you could get intraday rallies like you saw yesterday.

Also read: US jobless claims point to improving labour market

Below is the verbatim transcript of Udayan’s comments on CNBC-TV18

The Nifty probably masks or does not reflect how much pain our market has gone through over the last few weeks. Yesterday’s price action was doubly disappointing since we had started the day by saying there could be a bounce back because the market was oversold. There was an attempt at a pullback in the morning and again in the middle of the day. At one point the Nifty even went up to 5,750 but then got hammered down.

Now, there is so much overhead resistance that people just do not believe the upmoves. They want to sell or supply paper into any small upmove in the market.

Many stocks have come down to their 52 week lows and the midcaps again have started underperforming big time over the last couple of days. I don’t know but at any point you can get one of these pullback rallies; yesterday one such attempt was made but it failed. The shape of the screen has not been looking very good and it looks like there could be more downside.

The clarity from internals is that the market probably is heading southward. The problem with midcaps seems to be local because yesterday, the foreign institutional investors (FIIs) were not very big sellers. In a few specific stocks like Titan Industries or Bharti Airtel there probably was FII buying yesterday but Rs 200-300 crore of buying is not going to cut much ice with this market.

The market has become structurally quite weak and now some of the largecap stocks are starting to hurt. The way HDFC Bank has come off to Rs 600 suddenly and that is the bluest of blue chip and that has started seeing some selling over the last few sessions. Tata Motors’ fall to Rs 270 is quite alarming and that too on very big volumes. So, it is not just midcaps, which have been getting hammered for sometime now, even the stronger stocks in the market are beginning to come off.

My bigger worry is if something goes wrong to IT in the earnings season this time because that is the holy cow in the market right now. If for some reason, there is a slip up in one of the big IT earnings and the IT sector starts coming off in April, then the market will find it very difficult to defend even 5,500 levels. So, let us keep our fingers crossed on that front. However, a pullback rally not withstanding, which can happen at any point, the path of least resistance right now is still down.

Yesterday, we broke through that 5,660 level on the Nifty and we are setting ourselves up for at least a 5,500 kind of level in the near-term but there are no signs of the markets bottoming out yet. All of this has happened without any FII selling because there has been no meaningful FII selling this year. In fact a lot of money has come in, albeit it has slowed down and we have already lost 10 percent from the recent top. So nothing is inspiring a lot of confidence. The Nifty, if you just strip seven-eight stocks, is trading sub 5,000 levels and most stocks have collapsed to those kinds of levels already.

The Nifty has been held out by a few constituents like an ITC, Infosys, TCS, just a handful of names. Now, the bigger fear is whether some of those names start buckling under pressure because good quality stocks are the last to fall. If for some reason, a fall is triggered off in either FMCG or IT, then the Nifty is going to go for a complete toss.

So for now, the traders have no option but to remain on the short side maybe with a slightly deeper stop loss because you could get intraday rallies like you saw yesterday. They will probably not be very meaningful but there are no signs from the screen that the downtrend has exhausted itself yet.

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