Mkts to bottom out in next 10-12 sessions: Quant Broking

Here is a verbatim transcript of the exclusive interview with Sandeep Tandon on CNBC-TV18. Also watch the accompanying video.

Q: What do you think? We are ripe for some kind of a technical pullback at least or is this one-way street going to lead us lower before we get that?

A: We are in a very advanced stage of capitulation. In the next 10-12 trading sessions, the markets should bottom out. Then one will see some amount of consolidation phase for a few months before it starts inching up. I strongly believe that a lot of index heavyweights like Reliance or ICICI Bank or Bharti are in their last stage of capitulation now.

Q: Even if there is a pullback from these kinds of lows, do you think we are going to get back to those 3,800-4,000 plus Nifty levels this year?

A: It looks very difficult from the current level. 3,700-3,800 could be a reality this year, but crossing 4,000 looks very difficult.

Q: In terms of a price cut or further capitulation, what kind of levels do you think the Nifty might get down to before we see a pullback?

A: It is very difficult for us to pinpoint an exact level. But in terms of time, it should be in the next 10-12 days. At around 2,800 or 3,100 one should see the bottom, which is very close now.

Q: What kind of trends do you see for some frontliners because the price damage that we saw through last week was quite intense, particularly for blue-chips but not so much for midcaps?

A: In any bear market correction, blue-chips generally tend to correct between 60-70%. Midcaps and smallcaps correct somewhere close to 80-90%. These corrections are similar to what happened in 2000, even the index corrected close to 57%. As on Friday, we saw a 53% correction. So, we have already seen price-wise damage.

What is left is the time-wise correction. Whenever this capitulation makes its final bottom, we will see a good amount of consolidation before the markets move up again.

Q: Do you think this could be the consolidation range - 3,000 to 3,700 on the Nifty, and 10,000 to 12,000 on the Sensex. Would the markets form a multi-month range here, which is the bear market bottom, or do you fear that we will get to much lower lows and then form the consolidation range?

A: If 3,170 holds for a day or two, then we will see the Nifty ranging between 3,600-3,800. But if it breaches 3,170 then the Nifty could slip to even 2,600-2,700.

I do not advice anybody to create a short position at the current level. I would like to close out my short and wait for an opportunity to build some amount of long positions.

Q: Some action has already begun to get built up in the November series. Would you be able to take any call for this series right now?

A: It is very difficult given the global background. Global volatility is shooting up and we have seen the VIX moving up to 80%. These are like lifelong highs. We still believe that global volatility will remain high for many months to come.

There will be no divergence in this volatility. This volatility cannot sustain at these levels for a very long time. That is the reason we are optimistic about the next 10-12 days. It should be a global phenomenon, and not a local phenomenon.

Q: What is your sense of the kind of short covering that might come if this market does move up a couple of hundred points on the Nifty? Do you see huge shorts that need to be covered or not quite that extent this time?

A: Short positions are very meaningful particularly, in a stock like Reliance or ICICI Bank or Bharti. These are historic high short positions that we are seeing right now. So, definitely short covering can drive prices.

A lot of people are holding a strategic short. They will not be in a hurry to cover these positions because they had short against their portfolio. So, I don't see that sort of mad rush. Perception is still very negative per se. So, people like to keep some amount of short in the system.