Yesterday, the Nifty and Sensex dropped nearly one percent each. The Nifty closed below 5,200 mark on the back of weak rupee. The Sensex closed at 17,151.19 down 150.72 points.
Sudarshan Sukhani of s2analytics.com says, the Nifty is coming down. "Trend is down. Short on any rally," he advises.
According to him, the market is on the verge of a breakdown.
Below is the edited transcript of his interview on CNBC-TV18. Also watch the accompanying video.
Q: It’s looking more like the market is grinding down to 5,000 base. Is that the approach a Nifty trader should take this morning?
A: Yes, that is the approach. For all of the last week that is what I had suggested that the market is coming down. Now, the pace of the decline has to be decided by the market itself, sometimes its fast, sometimes described as grinding. But the trend is down. Today’s view should be that any rally, any breakdown should be use to build-up short positions, if not already done.
Q: Would you be disappointed if the Nifty closes below yesterday’s closing levels because the Nifty performance over the past two weeks intraday, did dip to levels of about 5,150 but haven’t closed below 5,188? So a closing below what level on weekly basis will be extremely disappointing for the markets?
A: I am not sure because I am short in the market. I would be thrilled if the Nifty were to close below 5,188 on a more sober note. The market is on a verge of a breakdown. Roughly 5,180 is the low that have held on to for the last seven days; the Nifty has come to 5,180 and bounced back.
So a close below 5,180 tells that the Nifty has broken down from a support and also closed below that support level and it is not just an intraday breakdown. But to my mind that’s just a matter of time. If that doesn’t happen today, it will probably work out on Monday. I am not very keen to take long positions even if the Nifty were to recover and stay above 5,180. The trend is still down.
Q: You would be a short on ICICI Bank today?
A: Yes, ICICI Bank rallied, Rs 900 has become lot of resistance for it. It backed from Rs 900 and now the chances are its going to break Rs 840 levels. Intraday targets are slightly different, it is Rs 830 for intraday. Once that breakdown happens, we can expect it to go below Rs 800.
If the Nifty falls and it should, it’s not going to fall alone, all its components will also go down.
Q: Jet Airways was under pressure yesterday and do you think that has more downside pressure?
A: Yes, more downside pressure and it was also a sell yesterday. Jet Airways’ eventual target is Rs 278. It has made a bearish pattern and the chances are that it will go below Rs 300 and come down. That’s not the target for today. Today’s target is whatever the market gives you but it’s a positional short in Jet Airways and not just for intraday.
Q: Financial Technologies is showing significant downside risk?
A: Yes, Financial Technologies is showing a pattern which suggests a target of Rs 620 at the minimum and that is a short-term target. My sense is that it will reach Rs 500 eventually. It doesn’t come on the list because it’s no longer an active stock. Multi Commodity Exchange (MCX) has branched off and trader interest is no longer there. But if we see this big decline coming and not to forget that it has fallen from Rs 900 to Rs 600 already, so the trend is down. It’s cracking Rs 600 and going much below.
Q: DLF is a sell today?
A: Yes, I have been downbeat on DLF because DLF rallied a month ago. It found lot of resistance at Rs 205-210 area. It couldn’t cross that and that gave the message that these rallies are relief rallies and the trend is down. Yesterday DLF fell after a three day rally. That three day is the maximum that a correction takes place, so we can assume that DLF’s downtrend has started, Rs 180 could be an immediate target but eventually DLF should revisit much lower levels.
Q: You like Hexaware Technologies in the madcap IT space?
A: I have been liking Hexaware when it was Rs 100, when it was Rs 90 and when it started its rally from Rs 85-90. It is now at Rs 130 and stocks that go up in this market have to be welcomed. Hexaware is in a trading range for the last six-seven days and if it breaks out of the trading range it becomes a buy in spite of the subdued market that we will see today. So Hexaware is an outstanding candidate for a long position, for a hedge, everything on the long side.
Q: You are long Raymond?
A: I am long Raymond. Raymond is an outstanding stock. Some of the textile names have disappointed. Century Textiles and Industries has become a sell now. But fortunately Raymond declined from Rs 435 to Rs 350, it was a correction. That correction seems to be over and its original uptrend is resuming. An initial target for a trader is Rs 435 where its earlier highs were made. For a short-term trader, i expect this rally to continue to Rs 435-440 level. So whether you are a day trader or you are taking positions, Raymond should be considered for the long side.
Q: This seems to be how opening will be with a cut of about 0.5% each for the Nifty. People have been talking about the monthly averages for the index. Is that an important level for your or is the trend clear and the trend is down?
A: The trend is clearly down. The market is going down. It was 5,400 and now its 5,180 so I don’t have to push it down. It is just the market’s message and I am conveying it. The moving averages are immaterial, when people trade, they trade on momentum. If they feel markets are going down they become sellers.
Nobody buys or sells looking at a moving average level, so these levels are not significant; they only indicate the overall trend. It is just that if prices break below the moving average, we will think that the moving average is also giving a sell signal and we have to go by momentum.
Q: Despite the trend being down you think TCS will hold up well?
A: I hope so, its one of the better stocks. Earlier I thought TCS would breakdown. After the results, it rallied remarkably and it maintained that rally, that’s the important part because one day wonders can happen with all the stocks. But to consistently stay above that level is important. TCS has done that, it’s an out performer. I don’t think one should buy anything this morning or even during the day but if at all one wants to buy then TCS is only to be bought into.
Q: After yesterday’s fall of about 11% on IRB Infrastructure Developers, you still think there is some downside?
A: I think there is lot more downside. The stocks that start falling do not stop on a day, they keep on falling. IRB Infra’s targets are Rs 130. To me IRB was one of the out performers of the infrastructure space but it’s just given up and that’s happening to all other infrastructure stocks. The target is Rs 130 but it could go lower than that.
Q: Have you had a look at Aditya Birla Nuvo’s charts?
A: As I had mentioned it two-three weeks back that many midcap stocks are giving signs of distribution and we have seen that they are all cracking down. The index has been an out performer when compared to midcap stocks. Aditya Birla Nuvo which was a good stock to own and buy into made a distribution, a bearish head and shoulder. It has cracked down and broken below it, suggesting lower levels are ahead. It’s probably a buy once the decline is over but at this stage point we should be looking at lower levels maybe even Rs 840, maybe even Rs 800.
Q: Your view on Arvind?
A: Arvind has been in the buy list earlier as well and it is still a buy. I am gratified to say in spite of all the market moves, Arvind reached the target of Rs 90. It could easily go to Rs 95. It has seen some good rallies so don’t buy it now, wait patiently for that consolidation dip but then go long in it.
Q: You like the chart of Shree Renuka Sugar?
A: It’s a risk because Shree Renuka is at the lower end of its trading range, lower end of its charts. It has fallen to Rs 30, which is where it was. It’s the lowest we have seen and it is now building a trading range. The sense is that sugar sometimes does quite contrary to what the market does, so Shree Renuka is worth buying into.
It is important that traders ishould maintain a stop loss and if it doesn’t work out you get stopped out. If it does these things are high beta, so they can give you very good moves on the upside. So it’s worth taking a long position here.
Q: Sintex Industries is on your short selling list?
A: Sintex keeps on coming on the short sellign list. That is a stock that you sell. At some point it will even go away from the short selling list because it would have fallen so much that we would be afraid of selling it. But that level has not come. Sintex could go to Rs 62-60 and somewhere around Rs 45-50; we would think we cannot sell any more.
Q: You keep an eye on currency as well. For you what kind of downside risk is present for the rupee right now?
A: The markets can do anything and the currency market is very big. My charts suggest that 54 would be taken out, it’s only a matter of time and we are probably heading higher than 55. Once momentum builds up there are targets and momentum cannot be slowed down by talking. The Reserve Bank of India (RBI) will do whatever it wants. The rupee is going towards 57-58.
Disclosure: I have no personal holding in the stocks discussed.