Dhiren Sarin, Technical Analyst, Barclays is bullish on Nifty and sees it gaining 5 percent in next few days. "We can be modestly bullish but we can't be aggressively bullish until that 6400 area gives way," he told CNBC-TV18.
He explained that Indian stocks have recovered on the back of global sentiment and optimism. The S&P is making all-time highs and Sarin expects it to gain another 4-5 percent by the end of 2013 with a target at 1700. All of this is reflected in emerging market (EMs) indices.
Sarin further said that in his view the trading range for rupee would be at 58-60 per dollar. He also advises buying gold for short term.
Below is the verbatim transcript of his interview to CNBC-TV18
Q: What have you made of the Nifty move over the last few weeks - it has been a very narrow move but it is moving up nevertheless?
A: For the Nifty and Sensex, Indian stocks have recovered somewhat and this is on the back of global sentiment and optimism that has come back into the markets. This is also the case for broader emerging markets (EM) indices for Thailand stock exchange, for Malaysia so this is not just an effect of the Nifty itself, it is global markets.
If one looks at the west, the S&P is making all-time highs, the Dow transports and the list goes on so it is not surprising to see Nifty pretty buoyant at this point. We think it can head higher another couple of percent.
The big levels that come in are around 6360-6400 area for the Nifty. These were the peaks in 2008, 2010-2011 and we have not been able to overcome this on several attempts. We can be modestly bullish but we can’t be aggressively bullish until that 6400 area gives way.
Q: Even at this point though you would put a long trade on the Nifty. You think essentially the trend is up?
A: Yes, indeed I would. If 5910 or so would be the support zone. If the Nifty starts to drop back below there then we would take profits on our bullish position. We have been recommending bullish positions since 5500-5600 area so we are quite happy to see this move.
Now what we would do is tighten our stops and look at about 5900 on the downside. As long as we stay above there the market can continue to chop higher.
Q: There has been some heartburn over how the banking space has suffered within this market any targets on the Bank Nifty and whether that as well is set for a recovery?
A: We think that the Bank Nifty will move in line with the broader Nifty. In fact, the Bank Nifty can start to outperform a little bit. Again this sentiment comes from abroad, the US is starting to outperform the banking sector and especially leading the way higher.
With these markets posting all time highs – the higher beta indices like the banks, technology might start to do better. We are keeping an eye on that, but for India specifically it should be quite in line the Nifty and Nifty banks both going up a couple of percent together.
Q: Any thoughts on the rupee-dollar?
A: It is quite range bound at this point, not too aggressive. We think that it probably trades sideways. The range is 58.95 to about 60. Within that range we would look to sell rallies, very modest bias here though.
If we start to pop up above 60-60.10 then the INR starts to become a worse situation. We are patient and do think the medium to long-term trend is still higher for dollar INR. Even when dollar-rupee is 55, you are calling 62-63 and we still think that is the case. However, at this point over the week or so we prefer to be patient and just watch price action quite closely between the levels that we have just mentioned.
Q: How about gold? How are you reading this recent pullback?
A: This is the most interesting markets. Gold now is at a pretty sharp change in sentiment. We think either it is forming or is very close to forming a strong low. However, when I say that, I am talking about a longer term 2-3 year horizon. We think that we have had a strong correction lower from the USD 1900 area all the way down to sub USD 1200. Now the market is trying to base. One of the reasons, the near-term uptake is likely to keep going is because inflation expectations are increasing.
As most of us know, gold is often used as an inflationary hedge. As such we think gold can probably push up to USD 1375 maybe USD 1400 – can’t be very aggressive at this point. It is the summer, trading conditions are quite illiquid and thin but nevertheless we prefer buying dips on gold for the short-term.
Q: What do you foresee over the next couple of months for the Dow and the S&P – likely to move higher or are the charts stalling at these levels?
A: In the summer season we often see some sideways chop in, in both the Dow and the S&P. However, this summer has been slightly different so far. The market has been very-very strong so we are quite impressed by this.
For the S&P, we can easily gain around 3-4 percent. We are looking towards 1700-1725 in two year and later in the summer the risk increase for a bit of a correction slightly choppy moves would not be totally bullish on it. But we do think that as long as it is sticks above these levels we do not see any drastic liquidation. The market should stay pretty resilient.