SENSEX NIFTY
Feb 24, 2012, 12.40 PM IST | Source: CNBC-TV18

A correction would be healthy for market: Anil Manghnani

The Indian marketís uptrend has sort of taken a pause in the couple of sessions. Anil Manghnani of Modern Shares & Stock Brokers says, after the recent run up, a correction would be healthy for the market.

Anil Manghnani

Analyst, Modern Shares & Stock Brokers

Expertise : Equity - Technical

More about the Expert...

The Indian marketís uptrend has sort of taken a pause in the couple of sessions. Anil Manghnani of Modern Shares & Stock Brokers says, after the recent run up, a correction would be healthy for the market. ďYou had 1,100 point one way move, so if the market does correct, itís probably healthier for the market,Ē he adds.

Many important events like election results, the Budget and the RBI policy are lined-up in March. Manghnani says, these events will make the market volatile.

According to him, 5,200-5,250 is the support for the Nifty.

Also read: Is current market rally start of new bull trend? IIFL says yes

Below is the edited transcript of his interview with CNBC-TV18's Mitali Mukherjee and Sonia Shenoy. Also watch the accompanying video.

Q: What is the trend that you are seeing on the charts now? In case there is more volatility in this new series, do you think it would be a prudent thing to keep your positions light?

A: We have a lot of events coming up this monthó the election results, the Budget. All that will add to the volatility. You had 1,100 point one way move, so if the market does correct, itís probably healthier for the market, given that itís been a one way rise. When it can soak such a big rise, it can also lead to a bigger fall. So, it is better it pauses, pulls back a bit, gets cash sitting on the sidelines in at lower level then it can add to the rally. I think if it keeps going up one way then its detrimental later stage.

We spoke about 5,650 as a key level, atleast has respected that assured volatility there and correction from there. So, going forward, thatís a key level to watch. If we are able to take the next call, itís got to be either ahead, if it crosses 5,650 or more ideal if there is a pullback to a key support level where you can buy.

I thing buying right here is sort of an in-between proposition. So, wait for a correction. But given the sheer nature of the rise, you would expect be it index or stocks, there will be a lot of activity or lot of buying activity at lower levels.

Q: In terms of trading approach for this series, does it seem more likely technically that the market gets into a consolidation or range-bound phase or do you think because of the pace of the rally, there is going to be a sharp give back before we settle into a range?

A: I think you will have to go with the latter. It is very rare, after such a big move, we would see a sideways movement. I think volatility will be there. I hope the futures gap, premium of 50-55 points was strictly because of the rollover. That adjusts in the next couple of days. But if you continuously see 50-point premium, that is actually going to be the problem for the market because then it gets overly long. So, I would like to see that premium settle down to about 30 points then I think the market could be little less volatile.

There is so much news out there, if there is hint of bad news, the market is so overly long, it could create a bigger fall. So, the premium needs to come down. If you are looking level wise, I am not saying it will come down right away, I think there will be pull backs maybe lower top, equal top then a fall, but the key level for this market, in any fall, will be somewhere around 5,200-5,250 mark. The reason I say that is 5,220 was 200-day when it got taken out and the channel also that broke out that led to this fierce rally was around 5,250 mark. So, you will have to see that as a clear support going forward.

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