SENSEX NIFTY
Apr 11, 2013, 01.20 PM IST | Source: CNBC-TV18

See Nifty at 5200 if 5500 breaks; largecaps in danger: Suri

Bullish on Indian equities for the past one-and-a-half years, trader Atul Suri is a concerned man these days looking at the way technicals have panned out over the last few months.

Bullish on Indian equities for the past one-and-a-half years, trader Atul Suri is a concerned man these days looking at the way technicals have panned out over the last few months. Indian markets have almost erased all year-to-date gains and under-performed global markets this year on concerns of current account deficit, slowing growth and political uncertainties.

Currently, the Nifty is trading just above the critical 5550 support level after yesterday's dramatic rise , but the big question is: Is this pullback sustainable? According to Suri, if Nifty breaks 5550-5500 convincingly, the market is in for a grind to 5200. And that will be very painful because the midcaps are smashed beyond recognition. The largecaps have held out so far but it will be their turn to fall if this 5500 level does not hold out.     

"For me the important part in the next few days is to see that whether we are able to come out and take out 5750. That is again about 150-200 points from where we are right now," he told CNBC-TV18 in an interview.

He says it is going to be very challenging hereon for market to move up because there is a lot of call writing happening at 5600-5700. So shorts have also come into the system. "The market will have to clip out these shorts, clip out these 200 DMA and take out the last point. So I feel that the real test area is going to be whether this market can take out 5750," he explains.

Below is the verbatim transcript of Atul Suri's interview on CNBC-TV18

Q: Would you say that there has been a breakdown in the market?

A: Yes, there has been a reason to be worried. I have been very bullish on the market for the last one-and-a-half year. This is the first time in the last two-three months, the way the technicals have panned out, is an area of concern. Any upmove should have higher bottoms and higher lows which is a classical stuff. The last significant level was around 5550 and that is just about where we are. This is just below 200 DMA and here there is a good support for 5500-5550 level.

The market has stalled, but we are having a pullback maybe yesterday and a little bit of today. Is it sustainable? Can it bring about a reversal? Is it the start of a reversal or is it just a small pullback that will get sold into or shorted into? If this level of 5500-5550 breaks, we are in for a very big grind and can head much lower all the way to 5200 on the Nifty and that is going to be very painful.

The market has been in two spaces, midcap, small cap is smashed beyond recognition. The larger caps or more importantly the index heavyweights have held out. It will also be their turn to get hit if we are not able to hold the 5550-5500 band. So, I am concerned with the way things have panned out in the last 2-3 months.

Last year was a great year, we had 25 percent plus return and we are already down 9 percent year-to-date (YTD) over the last three months. The way market is panning out, losing its breadth, small cap, midcap space is totally decimated. A handful of stocks, specially spaces in IT, fast moving consumer goods (FMCG) that are holding the index, so for me the important part in the next few days is to see whether we are able to come out and take out 5750 that is again about 150-200 points from where we are right now.

It is important because if you look back, that was where the last pullback was. If we get there, we will also takeout 200 DMA which is somewhere at the midpoint. It is going to be very challenging because there is a lot of Call writing that has taken place at 5600-5700. So shorts have also come into the system. The market will have to clip out these shorts, clip out these 200 DMA, take out the last point. So, the real test area is going to be whether this market can take out 5750. Until it does that, it is not going to be a very happy story.

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