Mar 25, 2011, 09.12 PM | Source: CNBC-TV18
Anil Manghnani of Modern Shares & Stock Brokers in an interview with CNBC-TV18 talks about his reading of the market and the outlook going forward.
Anil Manghnani (more)
Analyst, Modern Shares & Stock Brokers | Capital Expertise: Equity - Technical
Below is a verbatim transcript of his interview with CNBC-TV18ís Mitali Mukherjee and Sonia Shenoy. For the complete interview watch the accompanying video.
Q: What is your take away from this week and what do you think looks like a doable target on the upside for the Nifty because of this strength?
A: Itís all culminating. The last two-three weeks, if you remember, what we have been talking about where the first support was 5,375 on the Nifty and on Monday extended to about 5,340. It held that range and the key if you see in the last week when we were correcting from 5,500 levels. We also had a unique experience that even though the market was falling, the Nifty Futures consistently maintained a 15-20 point premium. Probably, now in hindsight, it would suggest that a long buildup was happening, even though the market was coming down.
Having held at 5,340 bounced. Yesterday was a key breakout on both the price chart and the relative strength index (RSI) chart. The 14 day RSI on the daily chart has taken a long-term six month trendline yesterday on the upside. If I take sometime around January and I connect, even the price chart it has broken out at 5,508.
All that we discussed a couple of weeks back is happening because the market was so suspicious or skeptical on the down move, that not too many longs were in the system and probably you needed an upmove first where a lot of people would get bullish before the next down leg.
At that time I talked above 5,700-5,750 being that target. This time we build up momentum where it will be easier to break that 5,600 barrier but the key test would now come at 5,700-5,750. There you could get a situation where people would become a little more buoyant because by then you would have crossed the 50 and the 200 DMA and that could be the trap that I was looking for.
I will still play on the long side. Today we will have an up day but you might get a slight pullback on Monday-Tuesday. Post that into expiry by Wednesday-Thursday-Friday it should all look higher. Maybe in the first week of April look for signs as to whether the market is topping out. For the time being you can be on the long side.
Q: In doing that does it have a higher base as well, if it is moving to 5,700? What do you watch on the way down?
A: You could still watch that 5,400 mark but that would become irrelevant right now. This is the move that you require for the market to get a little more long. I wonít say excesses in the system but to buildup some sort of long positions that could create the next sort of panic if there is any global event. Right now we have had earthquakes and we had Libya.
I remember last expiry, we were closing at 5,250 and oil at USD 102 per barrel on light crude was being flashed everywhere. Today we are at USD 106 per barrel and still the market is closer to 5,600. Oil will play its part but over a period of time. I donít think it happens on a day-to-day basis.
This is the right move to create that sort of a trap that would happen at 5,700-5,750 for the next fall. But you play on the stock side rather on the Nifty right now. Stocks have not really moved.
Q: There have been some confusing signals coming from the IT charts; there was a sense that perhaps some of these charts are breaking down but in the last couple of days many of them have seen a resurgence. How would you trade the bigger ones now?
A: If you look at the sectoral chart, it is still one of the stronger sectors. Obviously, Infosys has played catch-up on the downside to rest of the market but it has taken support around the Rs 2,925 which is the 50 week. TCS is the one I still feel can play catch-up on the downside.
My gut feeling is since these stocks havenít really fallen they shouldnít participate too much on the upside. If you are playing for this move to 5,700-5,750, I would probably avoid IT. It would correct on the next fall to play further catch-up to the market.
Go and play sectors that have corrected. Banks for example have 25% weightage. A lot of the PSU banks over the last two-three weeks havenít really been volatile. A lot of them have been sideways, be it an IOB , Bank of Baroda , Bank of India , Canara Bank , UCO Bank and Syndicate Bank . These have gone very sideways and have made some sort of base for at least a trading bounce.
My call in this move is if you are playing stocks avoid IT, look to buy banks. You will get a move in capital goods because itís oversold but it is clearly one of the weaker sectors. That is a sell on rise. The other one that is key for this market and which has rallied significantly last year and now corrected is autos.
But I am going to take a contra view and say, donít buy but use this rally to sell because there is early indication on the auto sectoral chart of the 50 DMA breaking below the 200 DMA. This could be the last move in auto. I would look to sell auto but I would like to play the PSU banks for that move to 5,700-5,750 on the Nifty.
A: On Tata Chemicals there has been some news but if you look at the overall set-up this is a stock that did not participate even in last yearís rally. It is in the same grounds like RComm which made a new low and even broke the 8,000 Sensex lows. Itís a stock that you would use the rally to exit. I donít have a level on it but definitely if you look at the monthly chart its still a sell on rise.
Deccan Chronicle has reached the 50 day average, so I would look to see what it does here around the Rs 80 mark. If it can cross Rs 80 and sustain above it then you got a bigger move up to Rs 105-107. Just keep an eye on what it does around this Rs 80 mark.