Anil Manghnani sees another down leg looming; suggests buys

Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by Anil Manghnani See what other Experts & Brokerages are saying about Apollo Tyres See messages about Apollo Tyres

The markets managed to stage a four-day winning streak this week still huffing and puffing from the recent spate of scams and tepid global cues. Yesterday, the Nifty managed to regain the all-important 6000 level fueled by broad-based buying in many of the largecaps.  

Speaking to CNBC-TV18's Sonia Shenoy and Udayan Mukherjee, technical analyst Anil Manghnani of Modern Shares & Stock Brokers said the oversold nature of the markets helped create the fast bounceback. "At least one more down leg-not back to 5,700-but somewhere between 5,900 and 5,800 is definitely possible," he felt.

Below is a verbatim transcript of the interview. Also watch the video.

Q: You think this 6,000 level could prove to be a resistance for the market or you see us taking it out easily?

A: The markets are fascinating. They have their own mind. Last week Friday, we were sitting here worried about whether the scams would takeover, we would wait 5,700 and we would go to 5,400 and the top has been made and this week now at 6,000, the call is: when are we going to take out 6,300? We talked about it last week that things are going to happen fast. We keep hearing things about consolidating or market needs to take a breather but that doesn't seem to be the case. It is either one way up or one way down.

My gut feeling is the bounce was to come at 5,700 and I think what attributed more to the bounce, more than the recent global market rally is the fact that last Friday, the stocks got so oversold, some of them were down 20-30% intraday-that created the fast bounce back because of just the oversold nature. If stocks are just drifting down, they don't tend to bounce that fast but when you get that sharp fall where it is a sell off, you get an equally sharp bounce. My gut feeling is that it should have taken us to 5,940-5,970. We seem to have crossed that but I do feel again this 6,000-6,060 mark is the cluster of the 50 day moving averages be it exponential or simple and normally, I would think that since we didn't hold them than the first time around, they should work at some sort of a resistance.

At least one more down leg-not back to 5,700 but somewhere between 5,900 and 5,800 is definitely possible. I think there if the market can show some sort of resistance of holding then you could start a more sustained rally. One more down leg and then probably I won't say consolidation but if we can hold there then I think the rally may have a little more to it. Today or maybe Monday, could get a little volatile.

Q: Fertiliser stocks came off yesterday because the meeting has been postponed but you still like them from a technical perspective names like Chambal ?

A: Chambal would be the ideal pick and the reason I say that even in the recent collapse in the market, RCF and Chambal, both took support around 50 day moving average given that some of the stocks or many of the stocks broke even below Rs 200, that seems like positive. I think Rs 84 would be a great support. Maybe with the stop of Rs 84 if Chambal comes to about Rs 88-87, I think that one should buy it with a target back to Rs 104.

Q: What about something like Apollo Tyres , which has had a good rally last couple of sessions?

A: The stock fell off quite sharply from more than Rs 80 levels after the results but it seems to be holding Rs 60 levels which is fine. It is in just a trading bounce right now. It needs to probably do a little more work around Rs 60-65 range but in this move I think maybe Rs 73-77 is a possible target where we definitely would exit and then wait for the fall to buy again.

Q: Would you try out any shorting opportunities if your view is that the Nifty will revisit 5,800-5,900 once again in this zone of 6,050-ish? Would you try out any contrarian short trades?

A: In addition to the Nifty or if you are not comfortable with the Nifty, I think many of these stocks that got majorly hit on last Friday. It would include your realty, be it a Unitech, DLF, HDIL, IB Real Estate or if you want to go to infra, Punj Lloyd, even JP Associates, I think many of these stocks that hit some abnormal lows have bounced back quite sharply just by default now, they would become short. Even LIC Housing, closer to Rs 1,100 would be a short.

Most of these stocks that are bounced back probably at that 38% retracement from the recent high and Friday's lows would definitely be short candidates for me.

Q: Apollo Tyres did very well for itself, so how would you trade that stock and I don't blame you if you don't track this one, Gujarat Fluoro that was up almost about 17% yesterday?

A: I think Apollo we have already talked about and I think the fall probably started much before the market. I think post its numbers itself Apollo Tyres is already falling but Rs 60 mark has held before and it held again this time. So that is good but I do feel that this is still a trading bounce probably Rs 73 to Rs 77 would prove a major hurdle. I think it needs to come back to Rs 60-65 range and restart maybe again consolidate at that point.

As the stock itself has gone a little weak because it broke through some major averages, so some more work at a lower level probably. Gujarat Fluoro I don't track that stock.

Q: Any opportunities in the sense the stocks which have collapsed today names like Welspun , Delta , Core Projects ? Any of them in your tracked list where you think the reaction has been excessive?

A: Not really. If I do believe that there is 100-150 point fall in the Nifty possible then it is unlikely that these stocks are going to bounce back the fact that they have fallen even before the market has started to fall. So I think I would avoid.

Delta Corp did have its run and till some Rs 90 it had a move all the way to Rs 127 yesterday. In this fall Rs 105 to Rs 97 is the key range but Welspun hasn't participated in any rally since May. So if it breaks below Rs 172-173, the next target is straight at Rs 143. So it is not a stock that one should be trying also because it has no momentum at all.

Q: You think Hero Honda has bottomed out at those levels that we saw yesterday?

A: I think on Tuesday we were talking about the stock that is being at all time high of Rs 2,100 or so and then suddenly the news with the whole Munjal's and the settlements, the stock collapsed over the last two days. It is a difficult, I think it will bounce back because of the way it collapsed but I think you will have to give it some time till the news settles.

On the upside maybe back to Rs 1,886 and in a best case scenario Rs 1,982 with a downside, your stop at around Rs 1,670 but I think you should wait for the news all to be out and stock to settle down. Right now it is a little too volatile.