SENSEX NIFTY
Apr 05, 2013, 12.44 PM IST | Source: CNBC-TV18

Nifty rebound unlikely; may even test 5320: PhillipCapital

The probability of the Nifty declining further from current level is quite high, feels Vineet Bhatnagar, Managing Director, PhillipCapital. If the Nifty falls below 5550, it could slide all the way to 5320 this month, he said in an interview to CNBC-TV18.

Vineet Bhatnagar

Managing Director, Phillip Capital

Expertise : F&O

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The probability of the Nifty declining further from current level is quite high, feels Vineet Bhatnagar, Managing Director, PhillipCapital. If the Nifty falls below 5550, it could slide all the way to 5320 this month, he said in an interview to CNBC-TV18.

Also Read: Don't see Nifty below 5550; short Ultratech: Edelweiss Sec

The Nifty has fallen 173 points on Wednesday and Thursday combined, and many technical analysts are betting on the index to bounce back as it looks oversold.

Bhatnagar, however, feels any pullback in Nifty stocks cannot sustain as foreign investors are bearish on the market. FIIs were heavy buyers of Indian equities in December, January and February, pouring in an average of Rs 22,000 crore at the net level every month. But the flows dropped sharply to less than Rs 12,000 crore in March.

Bhatnagar says FIIs have created short positions worth Rs 2000 crore in the Nifty in the current derivative series. He says, there is visible build up of short positions in key banking stocks. However, traders don’t appear to be as bearish on the IT sector, evident from the lack of build-up of short positions.

Bhatnagar says there are short positions building up in Tata Steel , DLF and JP Associates .

Below is the verbatim transcript of Vineet Bhatnagar's interview on CNBC-TV18

Q: It has not shaped up like a good series, do you think there can be a pullback? Are you looking at lower levels on the index?

A: There is a great chance that we could see lower Nifty levels against our expectations. I want to bring out a dichotomy that we are seeing in the data in front of us. One is that, the capitulation number that we compute has a contrarian indicator for Nifty as a benchmark. To analyse whether this is going to give us a consistent opinion, we also looked at the components of Nifty, the big heavyweights of Nifty.

On one hand we are looking at a high reading for the capitulation index for Nifty, which is 1.44. Whenever we reach a number like 1.5, the market bounces back quite sharply.

We also carried out analysis at an individual Nifty component level. There we were faced with a greater pessimism because big heavyweights like Reliance Industries , ICICI Bank , State Bank of India ( SBI ), Oil and Natural Gas Corporation ( ONGC ), none of them showed similar pattern. The pattern would have given us a conviction of a more sustainable or a durable pullback.

In order to reconcile these two views, if the markets were not to crack immediately beyond 5,550, which is a strong support, the pullback will be perhaps shallow and will lead to fall of the Nifty level. It will then result in a consistent bottoming out for both the index and the heavy components simultaneously. So, if the pullback were to happen, it should be shallow.

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