Sensex may see v-shaped recovery to 16K soon: JM Financial

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

Q: Is the market precariously poised?

A: Yes it is; we have pointed out in our reports that 14,800 on the Sensex and about 4,350-4,375 on the Nifty happens to be important supports based on multiple technical studies and that is the reason I think today's close for the market is something to be monitored very closely. Having said that and this market having corrected in the last three trading sessions is already oversold with multiple positive divergence based on a number of technical studies. So I wouldn't rule out a pullback atleast from the current levels even if the markets have to really break the support levels going forward. Whatever happened in the last 3-4 trading sessions, continues to be within the framework of an uptrend. Since the uptrend began in the month of March, you have seen 10-15% corrections many times and there is always an excuse for the markets to correct which is monsoon at this point of time.

Looking at the global picture and the setup at this point in time, we believe that this is an excellent buying opportunity for traders and investors.

Q: So you think there will be a bounce back which will not get us to 4,700 quite in the near term or do you think this is where we bottom out in this fall and we get back and retest the recent highs again?

A: What is important is that firstly the market corrected from 16,000. There is a sudden talk as to how this sudden correction has really come in. But around that level, the market momentum was very strong and the volume activity was not there, technically the explanation for the fall is the fact that 16,000 happens to be the 61.8% retracement of the entire bear market of last year which is 21,000 to 7,700 and therefore it was almost a last hope level from a bear's perspective so I am not surprised that the market has corrected from 16,000 and because the market tends to make higher tops and higher bottoms, there is no reason to believe that we will suddenly get into a downtrend and start making lower tops and lower bottoms and if that is our view then I think there is a very good chance that the market actually recovers in a V-Shaped manner and gets back to 16,000 takes it out and moves to higher with a target of 16,500-16,700 possibly by the second  week of September. Earlier we were of the view that by the last week of August we could get to those levels but because of this local newsflow in the last one week, the uptrend has just got delayed and its really not got cancelled.

Q: Is this view consistent with what you are seeing in the global charts where the S&P is clearly keeping its head above 1,000 for the last few sessions?

A: When we were on your channel last time at around 15,000 levels, we pointed out that we have a target of about 11,000 on the Dow and about 1,150-1,200 on the S&P 500 and I think the US markets have really moved in tandem, you had a lovely pattern breakout take place on the Dow Jones industrial average at around 9,000 and on a daily basis a lot of market participants might argue that the US markets are over bought but they are just not seeing any signs of correction and whatever correction is coming in is happening on an intraday basis and on a closing basis you have not seen the Dow loose 150-200 points, its really not happened despite the fact that the Dow has done so well in the last 2-3 weeks and that is the reason I believe that Indian markets cannot ignore the global cues for a long period of time and once these monsoon worries are discounted in the price which has already happened quite a bit, I think the Indian markets will come back very strongly, also lets not forget, India was the outperformer till the May election results and after that it has just underperformed because other Asian markets are trading well above the June highs but Indian markets are struggling to take that out. So this is just an adjustment that has taken place in the last one or one and a half months, but because we believe that the overall picture continues to be strong, I think that India will have to bounce back, either it will be from 14,800 or maybe we could loose another 500-600 points and then bounce back. 

Continued on next page ...