The Nifty stayed lower for the second consecutive session on Wednesday amid Greece concerns and depreciating rupee. It declined 25.15 points to end at 4,974 yesterday.
Sudarshan Sukhani of S2analytics.com expects the market to be choppy today. He feels that today’s rally is unlikely to be tradable. “It is for the market to decide if it can create a base for itself at 5,000 levels,” he said.
Today is not a good day to trade Nifty, Sukhani suggests.
Below is the edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18. Also watch the accompanying video.
Q: Two difficult days for the index. How do you approach it today? You play for a bit of a bounce back or do you think the call is still to go short?
A: The call is still to go short but not necessarily today. If we have positional trades just as I have a positional short position then that needs to be maintained because choppy markets are not a good reason to exit an intermediate trend. But it’s quite possible that this market will now decide whether it wants to build up base around 5000 or whether it will continue and renew its downtrend. We don’t know the answers. The probability lies in favour of a continued downtrend but we’ll have to find out.
So we could easily go through a period of choppiness and some rallies but today’s rallies are unlikely to be tradable on the upside. First the markets have to show that they are not going down any further and so for today, probably that is the only message that the market can give. It is not a good day for trading the Nifty.
Q: You still have got a conviction sell on ICICI Bank from the banking space?
A: Yes because it fell with a gap yesterday. Banks are still the weakest of all the indices, of all the sectors. Since it’s not necessary that this market will rally from the morning to the afternoon, so any weakness during the day is an ideal opportunity, for a day trade on the short side, in ICICI Bank. Like most other banks it’s now willing to crack much lower.
Q: Apollo Tyres is out with results today, you have got a buy out on that name?
A: Yes I have a buy. There is always a risk in buying stocks in anticipation but Apollo’s charts are upbeat. We saw a double top that broke down from Rs 92-93. It has gone and completed its targets. For the last 4-5 days Apollo is in a trading range and yesterday it did well. So I would assume that the market is anticipating pleasant results. But apart from the results, purely on the charts Apollo is a buying opportunity. You start with a day trade and if it works out then it needs to be converted into a positional long.
Q: Another one of your sell calls is Century Textiles?
A: Yes it’s been a very big disappointment. Like most other midcap stocks it made reversal patterns, broke down. But in case of Century Textiles that breakdown seems to be continuing. It’s now on the verge of another break of the support level. If that one breaks, I don’t know where it’s going to go down to. This is no longer a real estate play, it’s something else and it’s very bearish.
So Century Textiles today is a short sell. In fact in a choppy market or even if the markets rally we could sell into strength in Century Textiles and hope that things will work on the downside.
Q: Ranbaxy was strong yesterday and you think that could be a good long trade for this morning as well?
A: Yes, I think there will be a lot of follow through in Ranbaxy. It has been doing all the right things, the corrections are mild. Stocks that go up tend to go up. One of my favorites on this show has been Asian Paints,from Rs 3000 onwards, I have been thinking it could not go up further but it keeps on going up and I have to buy it.
I think Ranbaxy is also coming into that stage. So we want to go long in Ranbaxy in the open, wait for the first 5-10 minutes. If the stock price begins to move up don’t worry about it, just go long. It’s one of the better trades for the day.
Q: IOC (Indian Oil Corporation Ltd) from oil marketing for a long time has been on your list?
A: Yes and there is a very good reason for that. One of the reasons is obviously because oil marketing suddenly is the flavour of the season which is thanks to the crude declines. But it’s not just that. IOC is making a very bullish head and shoulder pattern at the bottom, that’s a reversal. That reversal pattern tells us there is significant upside. When we reversed from the top there was significant downside for most midcaps, this is the exact opposite. So there is a positional buy in IOC.
Unfortunately options are not very liquid here otherwise traders could simply buy June Options and sit with it. But one can go and buy equity and buy futures. Apart from the fact that today, we could see lot of follow through from yesterday’s gains; it’s worth holding on to this position. If the market becomes choppy for a few days, some stocks will go up. So, IOC, Apollo, Ranbaxy, these are the stocks that will hopefully be on the side that goes up.
Q: You have a sell on Hindustan Zinc?
A: Yes yesterday it made new lows and closed at a new low. Metals are not giving good news and they are a sell at every opportunity. So rather than sell in the morning, if there is the slightest sign that the market has rallied and is then stalling, Hindustan Zinc is a sell. The strategy is same for Hindalco that if the markets rally and start showing signs of stalling then Hindalco would also be a short sell. So the point is that all metals are short sells.
Q: It looks like it is going to be quite start, will you wait for a bit before the market begins to trend in one direction or have you seen enough to open up trade on the Nifty?
A: No, it’s not enough to open a new trade, whatever positions are there I don’t think I am worried about that. If the market goes up 100 points, I would still maintain my short positions. Today the markets could be choppy and so there is no view, today is not a day when I want to go long.
There would be an opportunity if the market breaks down surprising everyone, then I will add to my short positions or take a day trade on the short side that is a possibility one must keep in mind.
Q: How would you approach gold?
A: I am a seller in gold, in fact for two days now we have been short selling. Gold is topping out. Gold in rupee is not a good chart because of the rupee variations we are seeing. But gold international charts are clearly topping out and that suggests that the bull market in this yellow metal at least for the time being is over. Silver was already in a miserable position but gold also to my sense has completed this leg of its bull market.
Q: Your view on HDIL?
A: You have to sell HDIL but today is not a good day to sell anything. But beyond that HDIL is a short sell. It is going much lower and it’s not going to stop here. I think the immediate target is Rs 61 but that is not the end of this decline. From Rs 125 it has fallen to Rs 65, this is not the way a bull market stock behaves. Eventual bottoming out may occur much lower.
Q: Hexaware took a sharp knock in trade, technically how is it looking?
A: It is looking bad. Earlier when we talked about Hexaware, we said now we should be selling it and I also explained why technical traders can switch from bullish to bearish because that is what the market is saying that is not continuing. Hexaware I assume is in for a deep correction rather than a bear market. But here also a target of Rs 105-100 is possible.
Q: What is your view on Educomp?
A: This stock is going into two-digits but its not doing that today. It is likely to slide to Rs 155-150 in the near-term and those who patience will see it below Rs 100.
Q: What about Shree Renuka’s charts?
A: That is a surprise; I was very upbeat on Shree Renuka. Just a couple of days ago last week, I thought it was bottoming out Rs 27-28, I also had a buy out on that but that didn’t work out, it got stopped out. It is really surprising how Shree Renuka has collapsed and now it’s suggesting a target of Rs 25 but more importantly it has broken all its support levels.
I don’t exactly understand what is going on and neither do I have the courage to go and sell it but the trade is on the short side now, there is nothing to buy here.
Q: What about PNB which did not have a good session yesterday?
A: PNB is down and is moving towards Rs 720. It is cracking Rs 700 and going lower. It is the same story for Bank of Baroda. These two public sector banks rank next to State Bank of India are giving visible signs of cracking up.
Q: How about an ITC?
A: It went up yesterday but I would sell in the strength. I don’t see ITC moving any further. It is an excellent short sell. Ideally, I would like to use Puts, so that if there is minor volatility there is a protectioin that is a serious trade that I am thinking of today. An immediate target could be Rs 225 and it could go lower.
Disclosure: I have no holding or interest in the stocks discussed.