The market has been in a consolidation phase post elections and may continue to remain so till August, Biju Samuel of Quant Broking said. In an exclusive interview to CNBC-TV18, Samuel said, in the near term, the market may correct but added that he expected 4,130 on the Nifty to hold.

Investors could buy metals and technology as charts for these two sectors looked quite strong, he said.

Here is a verbatim transcript of Biju Samuel’s exclusive interview on CNBC-TV18. Also watch the video.

Q: Do you think the Nifty is headed back to a new high above 4650 in this run?

A: After the event-driven blow which happened in the middle of May, some three months consolidation was quite natural and well in order, before we have the next sustainable uptrend. From that perspective, we label the recent weakness as part of the consolidation rather than a trend reversal. Mostly we have developed some serious patterns at the recent low especially something like morning dozy star, which is a very rare formation. We have another interesting pattern called an island bottom in BSE 500 so that gives some perspective as to what could be the near-term upside. The island bottom can retrace the prior fall completely so the prior decline was the post budget decline from the 4480 highs. The trajectory of the current swing could be towards that zone. Obviously, you can have some pressure points around 4,350 but a 100% retracement of the post budget fall is what we are looking at.

Q: For someone who is taking a positional trade though for very near-term call on the Nifty, what would you recommend right now: accumulate at this level?

A: We may have a target of close to 4500-4480 so one needs to keep that in perspective and plan a trading strategy accordingly. There could be a flutter from 4,350 levels. In the near term right now, if there is any immediate downside 4,130 around is likely to be a strong support. We can have one sharp intraday dip or a one-day crack but very near-term, 4,130 around should hold. The next resistance is at 4,350 and the later target is towards 4,480.

Q: Any concerns about the fact that volumes really dropped off these past few days?

A: Generally, at the initial stages of an uptrend the volumes may not happen that rigorously. We are not ruling out the consolidation continuing for another one month maybe till the middle of August. This may not be a dramatic beginning of a serious uptrend. What can happen is once it reaches closer to that 4480 levels, you might see things getting into a decline, then consolidation, and that process may go on for a month. One of the key themes that we are looking at right now is the possibility of the US equities and some of the developed equities getting into a next higher orbit. Recently, in past few weeks, there have been a lot of concerns about possible reversal of the global risk appetite.

If you go by the sentiments data, which we track quite closely for the US markets, in spite of concerns over various investor and advisory sentiments of last week, the Dow and S&P has been quite muted and the turnaround has been quite rigorous in last three-four days which shows that higher trends are quite strong there. There is a very interesting technical configuration on the Dow. This is a very powerful moving average compression. The 20 day moving average (DMA) tracks the intermediate trend, the 50 DMA tracks the medium-term trend while the 200 MDA tracks the long-term trend. All the three important moving averages relating to various time frames are all clustered at a tight zone right now. The latest rally has been broken out above that.

Continued on next page…