Bulls can stay calm till Nifty holds 4800: Jai Bala

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Bulls can stay calm till Nifty holds 4800: Jai Bala

So far 2012 has been good for the market. The Nifty has tested the 5,000 mark today. According to Jai Bala, cashthechaos.com, bulls can stay calm until the Nifty holds 4,800. “At the moment, 4,910 should be the stop, if you are long on the Nifty,” he advises.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by Jai Bala See what other Experts & Brokerages are saying about HDFC Bank See messages about HDFC Bank HDFC Bank BSE | NSE 29/05/12 Are Mutual Funds betting on HDFC Bank? Other Stocks in this news ICICI Bank | Reliance Industries | Larsen and Toubro | State Bank of India | Jet Airways | Kingfisher Airlines | Hero Motocorp |

So far 2012 has been good for the market. The Nifty has tested the 5,000 mark today. According to Jai Bala, cashthechaos.com, bulls can stay calm until the Nifty holds 4,800. "At the moment, 4,910 should be the stop, if you are long on the Nifty," he advises.

He further says, the Nifty will face resistance at 5,020 and 5,065 to 5,070. "If it can pierce through these levels, it is going to be very bullish. But if it cannot, I think that is what is going to be the most likely outcome, I am sure markets are going to reverse from there," he adds.

Also read: Expect Nifty to move to 5350-5400 post budget, says Way2Wealth

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

Q: It has been a good rally to almost 5,000 this morning. What do you do or how do you approach the Nifty now, after this pullback?

A: One needs to have a holistic approach to the markets. At this point, it is looking like a corrective rally to me. If you look at the markets from the 5,400 high to 4,530 low, the market has moved in a five-step fashion. The ascent from there has been a three-step fashion. This five-step down and three-step up is a very bearish combination. It can change as the market moves forward. But, at this point in time, it's quite negative.

Also, if one looks at the Baltic Dry Index, it has gone from 1,700 to 925. This is a vertical drop. Baltic Dry Index going down so sharply isn't helpful for the global economy.

I use the proprietary indicator, which has had tremendous track record for the last 12 years, it is still clocking a lower highs and lower lows. It still tells that India is still entrenched by market.

If you look at the yield spreads in Europe, particularly of Portugal, Portugal is going to be the new Greece. It is starting to behave like Greece. So, we have lots of problems coming through for the global markets.

Q: So where do you think the line should be on for the Nifty in this pullback, if you believe that this is just a corrective rally?

A: As long as the market stays above 4,800, the bulls are okay. If it does overlap into 4,800, I think this is over and we are going to start looking at new low once the market start hitting 4,800.

At the moment, 4,910 should be the stop, if you are long on the Nifty or Nifty stocks. That will be the first dent of weakness for the markets. So, as long as 4,800 is not breached, I think this market is okay and bulls can stay calm until that point. But once 4,800 starts getting breached, it is time to start panicking one more time.

Q: The only difference seems to be the way the Bank Nifty has performed this time around; SBI is up 14% in this last week. On the Bank Nifty, what kind of indications do you see?

A: The Bank Nifty is looking quite strong. But at the moment if one looks at private banks like HDFC or ICICI , they are not looking strong at all. Again the configuration here is looking like a collective rally. In fact ICICI Bank has actually thrown a mild sell signal for the market. If it goes below yesterday's low, I think its heading for Rs 590, which is new low for ICICI Bank.

The structure looks similar for HDFC Bank. If the Bank Nifty stays above 8,600, things are okay for the banks but once it starts dipping below that level then we are looking at a new low for below the Bank Nifty.