May 07, 2012, 10.51 AM | Source: CNBC-TV18

Don't short Nifty now, advises Sudarshan Sukhani

On Friday, the Nifty closed below the 5,100 level. In an interview to CNBC-TV18, Sudarshan Sukhani of says, a lot of shorts could have been covered on Friday afternoon. "Don’t short now. This is not the time to go short on the Nifty," he advises.

The Indian market is trading on a weak wicket over the last couple of sessions. It is embedded with global and domestic uncertainties.

On Friday, the Nifty closed below the 5,100 level. In an interview to CNBC-TV18, Sudarshan Sukhani of says, a lot of shorts could have been covered on Friday afternoon. "Don’t short now. This is not the time to go short on the Nifty," he advises.

According to him, the Nifty will touch 5,000 level today. "If the Nifty touches 5,000, which it should, I would be taking profits," he asserts.

Also read: See Nifty slipping to 5000 today, says Udayan

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

Q: If we get a gap down today, which is very likely, how should a Nifty trader approach it?

A: We have been preparing ourselves for a 5,000 level. talking about myself, we are short at 5,300. I am assuming a lot of short positions were covered on Friday afternoon because there were windfall profits, 200 profit points in three-four days. Today I am only with 20% of my short positions active.

If the Nifty touches 5,000, which it should, I would be taking profits on the balance. So, this is not the time to go short on the Nifty. We have to now collect our winnings, if any and wait for the market to again consolidate and give us new directions. The ferocity with which this decline has occurred tells us that probably 5,000 is not the end of it, but it’s far better to let the markets consolidate first.

Q: Reliance Infrastructure is in your sell pack today?

A: Reliance Infrastructure is a miserable chart. It also belongs to the group which is going to distinctly under perform. It’s already doing that. It made new lows in a market where at least the Nifty is still far above 4,500. So I would assume that Reliance Infrastructure is a short sell even today because most of these stocks open with gaps. They should be sold only on minor rallies but Reliance Infra seems to be a safe sell. There was a big decline and that decline should see lot of follow-through today.

So look for a small rally and go short in it. Position traders can build positions and look for the next decline in the Nifty when this will go much lower.  

Q: What about Indian Overseas Bank from banking because public sector banking has been a space which has been quite weak over the last one week?

A: Indian Overseas Bank is very weak. Earlier we were talking about the distribution patterns that were coming about and the market doesn’t oblige by immediately falling. But the distribution patterns have worked themselves out. In case of IOB, we are looking at Rs 83 as the closing price. The chances are it will open much lower and an eventual target of Rs 65. Not today but eventually.

So there is a lot of room on the downside for most of these public sector undertaking (PSU) banks. It is better to focus on the midcap banks for short selling. 

Q: ITC is a sell from thefrontliners?

A: Yes. ITC has been an outperformer. One knows why, the fast moving consumer goods (FMCG) stocks are preferred when markets are in difficulty. But that seems to be over. I would assume that ITC is on the verge of a breakdown.

If the market begins to stem this decline, that is consolidate and not go up, then ITC will be an underperformer and look to a deep correction. So, ITC is a short sell. Even this morning it is relatively a safe short sell.

Q: Cipla was quite strong through last week?

A: Cipla is very strong apart from the fact that it gained for all the five days. It fell to Rs 287, completed its bear market or a deep correction then it’s been consolidating. It’s consolidated, made fairly bullish head and shoulder pattern and it’s now coming out of it, it’s not broken out.

So Cipla should be a buy, it’s been in my buy list in the last week also so it must be in our buy list. We will try to buy it today if there is a decline, a gap down and that’s a very good reason to go long in Cipla because we are getting something that’s likely to move up and we will get it today at a lower price. So Cipla is my number one pick on the long side.

Q: You have picked Mphasis to buy from IT pack?

A: Mphasis is more of a reversal trade. I am assuming that it stemmed its decline, stopped falling and chances are that maybe it will start a rally. It’s different from Cipla which is what I am saying. Cipla is already giving signs of life. In Mphasis we are anticipating that something good will come out of it because it’s no longer declining, it’s breaking some minor trend lines also.

Mphasis is avrelatively high risk trade and probably not a good idea in the morning. If the market starts showing some signs of strength, I would be looking to buy Mphasis. It’s a better among the midcap IT stocks. 

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