The European Central Bank's unlimited bond buying plan sparked off an unprecedented rally in the Indian markets, as benchmarks recorded the highest gains in the last two months. On Friday, the BSE Sensex jumped 337.46 points and the NSE Nifty rose more than 100 points. Sudarshan Sukhani of s2analytics.com said the Nifty is in an uptrend and the critical levels would be 5350. He believes the market will test 5400-5450 zone.
Here is the edited transcript of the interview on CNBC-TV18.
Q: It was a great session that we had yesterday. We wrapped up the week as well with more than 1.5% gains. What kind of strategy would you advocate just for trade today and also the kind of levels that you would ballpark now getting into trade next week?
A: There is really no need to trade today because depth will be very low, volumes are likely to be distinctly on the lower side. We are only here to ensure that NSE backup systems work. If I remember correctly, the last time they wanted to test it on a live day, it was a weekday. The backup systems did not work and the rates were not F&O stocked. Maybe this time it will help.
The Nifty itself is in an uptrend. It has started day before. It has continued yesterday. We don't fight the trend. We don't question it. We do not say thus far and no further, because we never know how much more it can go. It may not. The critical levels are 5350 which I am assuming will be sliced and broken, if not today then certainly early next week.
We are looking at a test of 5400-5450 zone. That's where the Nifty developed cold feet twice earlier. That's going to be the critical area now, because 5350 probably will be taken out.
Q: If you think the Nifty is more likely to show a promise towards beginning to challenge 5400, what looked the best Nifty candidates?
A: This time I am assuming private sector banks will rally. That's what the assumption was yesterday morning and that continues. If we are looking at risk and assuming that we are in a risk on environment then private sector banks ICICI, Axis and HDFC, all three and HDFC Bank and HDFC Finance, all four are good candidates. They are safe. They are blue chips and they probably will give you more beta than IT stocks will.
Q: Any thoughts at all on how the S&P 500 is shaping up? We are seeing it moving closer towards that 1420 mark which has been a fairly stiff resistance. It has crossed that ater a lot of battle. Nw is this poised for a bit of an upturn? Is it time for long positions in the S&P 500, 1420 is a long held technical barrier and it has been crossed?
A: Yes. I would think that American markets are still giving buying opportunities. The targets I was after these barriers and the fact that S&P is at four year highs, new highs are always bullish. You heard me say that so many times. I think you must be tired of that. But it's a fact. New highs are bullish. The S&P is doing that and eventually I am assuming by Election Day it should be somewhere around 1500.
Q: IT had the best performance last week, be it HCL Tech that was up 6.5%, Infosys up 5% odd. There was some amount of scepticism that you had on Friday. Do you think the time has come to take your profits in IT or do you think there could be fresh long positions added in any of the names that I discussed?
A: I will clarify that. I had scepticism because we now have opportunities in other sectors and stocks where in the next week, the coming week, in the next 3-4 days the rallies in those stocks could be more than that in IT, because IT has done its bit. It held on, it maintained the Nifty levels, it rallied also.
It's not needed for IT to continue this rally. The index is now going to be supported by other stocks. It was only a very short-term call that we can step aside from IT and focus on the other stocks, banking for instance. Obviously, IT is an outperformer and it will continue to remain so. If it is subdued, consolidates, that becomes a perfect buy.
Q: Gold crossing another barrier of USD 1,740. I am only now looking at it in dollar terms. Now that USD 1,740 is crossed, USD 1,745 per troy ounce was where we got the overnight close, what's the sense you are getting? Is USD 1,800 and the old highs once again in sight?
A: Yes, it is probably not just USD 1,800, but the chances are that gold in US dollars will cross that level. It's difficult to give a target for gold. The trade here is, we are long, we want to be long, if we are not every dip is a buying opportunity. Go and stay long in gold. Don't look at targets. It could overshoot or it could reach that target, take sometime, but I think it's a good trade to be on the long side.
Q: In this risk rally we did not see crude perform. It's only maybe a day and half that I am talking about. But would the rally in crude be more muted? It saw USD 116 about 2-3 days back and didn't quite participate in the rally engendered by the European Central Bank and the jobs data in the US yesterday. Both of them unleashed some kind of a risk rally, but crude didn't participate.
A: Crude had done its bit earlier which is the reason why I felt that perhaps IT also will be subdued and crude will add to this rally if this rally persists. It’s not going to be left behind. My sense is that the trend is fairly strong.
These pullbacks, retracements are normal in most commodities, most instruments and that’s exactly what crude is doing. Eventually, if the risk on environment continues then we should see crude at USD 130. I know that is not good news for India, but risk on is good news.
Q: Any specific stocks that you are noticing where a strategy suggests itself especially in the midcap space? All these government stocks or the fertilizer stocks, Chambal, NFL, RCF all of them are up. Any trading idea for the day or for the shorter term in the midcap space?
A: Yes, but not the fertilizer space. That deceives every time we look at it. So let them be up. We have stocks for example like Bata where there is a potential to buy and there is Godrej Industries. These are two FMCG stocks which we are looking at, not for today I am talking of Monday, but we are discussing them now.