Entry point is between 4944 and 4994 levels: Anil Manghnani

ALSO READ See previous views by Anil Manghnani See what other Experts & Brokerages are saying about TCS See messages about TCS TCS BSE | NSE 29/05/12 Are Mutual Funds betting on TCS? Other Stocks in this news Infosys | HCL Technologies | Coal India | Patni Computer Systems | MindTree | Kingfisher Airlines | Jet Airways | Reliance Industries | Hathway Cable and Datacom |

Anil Manghnani of Modern Shares & Stock Brokers joins CNBC-TV18 to give his outlook of the trading action at the bourses. He says that the entry point to this volatile, yet range-bound market lies between 4944 and 4994 levels on the Nifty. "Nonetheless, this up and down movement is whipsawing a lot of traders, and so whether you go long or short, you are not making much money," he says.

Below is the edited transcript of the interview. Wait for the video

Q: What do you take away from a week like this in terms of trading action, which way is the Nifty pushing towards you think?

A: I guess it's still suggesting that 5200 is a problematic area for us and it has been for a couple of months now. But I did say that the fall from where you get such a sharp move from 4700 odd, right up to 5150, you really haven't got an entry point there. That entry point comes when get a correction of 38-50% on the Fibonacci. So I am still hopeful that may be 4994-4944 that is the crucial support or the Fibonacci retracement where I would like the market to go test. If it holds, then you can suggest that the market is heading higher again.

So I would watch for a move back to 4944-4994 levels with that being the buy range and your stop loss would be around 4890. Then you would play for an upmove.

However, I believe that the 5200 now is a clear level. Once it gets taken out, if it does, then you will get a lot more traders coming in. I think this up and down movement is whipsawing a lot of traders and so whether you go long or short, you are not making much money.

Q: What is your gut feeling- is 5200 going to be taken out, would you position yourself on the long side for that now and if it does, what is your stretch target?

A: That is a very difficult question. I am a little confused what the S&P is trying to do because in the last five-six days, it has gone from 1190 to 1220, back to 1190, then to 1220 again and then yet again yesterday, touched 1190 intraday. It's closed somewhere around 1125 now. So for five days, you had 30 points swings three-four times. My gut feeling is that S&P needs to correct now, it's been a one way move. So I would expect it to come back to about 1150-1155 range and then give a clear indication whether the bottom at 1074 which you saw a couple of weeks back is in place or not.

Domestically, I really believe that we would still go back to 4944 levels and then, if we hold it, then we will have a better chance of suggesting that 5200 will be taken out.

Right now, I am finding it difficult to find stocks that can really take this market up more than this 5200. It will still be in a range for the time, but I am looking more at what the S&P is doing rather than our own markets.
I feel that the dollar has one more leg up which is bad for equities. I am a little confused what the commodity market is doing because yesterday, gold was going down and oil was going up and the reasons for gold going down were that China's GDP data was lower than expected. But if the data is lower than expected, then why should crude go up? I think there is lot of confusion in the markets right now, even individually between the asset classes. So it might be another week at least before things become a little more clear.

Q: What did you make of TCS's fall and where do you think the stock is headed?

A: I reserved my right post even Infosys that my view on TCS is not that positive. I am a little surprised that its going up, maybe on strength of the Infosys numbers. And I said I would like to wait for TCS to actually come out with its numbers before I make a call on the overall IT sector.
I am not surprised that it corrected, the charts were suggesting weakness rather than strength, even though it was going up. I think there are two key levels to watch out for both the big names that crashed yesterday. For TCS, it is at Rs 997. If it breaks that, then there could be some serious issues for that stock. Other is for HCL Tech at Rs 390-392 now becomes a crucial level and any break below that opens up that Rs 360 on the downside. For TCS, Rs 997 breaks, then it opens up that Rs 850-900 range.

Q: Coal India has had a bad run and yesterday it snapped back Rs 10, do you think worst is over for the stock technically in the near-term?

A: I think yes, at least for a trading point of view because what I feel is that even though the charts may not suggest an upside, the fact that it went and retested the recent lows and did not break it, your risk return is little bit in your favour. The market is already up 300 odd points from the lows, so you are trying to pick stocks now that haven't really rallied towards downside or at least your stop losses are well defined. So this Rs 328 to Rs 318 range is a buy zone for me. At least from trading point of view, the stock should head back to above Rs 353.

Q: Did you take a look at midcap IT companies like Patni or MindTree ?

A: If you take Patni , the move has come out of nowhere. The stock was not doing much and till August, it was hitting new lows for the year-end. The stock had collapsed quite a bit. So yesterday's numbers were definitely out of the blue, but in this move maybe Rs 350 and you could stretch it up all the way to Rs 377 which is the 200-day moving average. I think there, maybe, you would see some profit booking. Definitely, the move yesterday has come out from nowhere.

Q: Technically how is Reliance looking is the chart more brittle now or do you think it's more or less stabilised at a plus Rs 800?

A: It looks a little more stable. Maybe even if it dips to Rs 809 and then Rs 790, it still warrants a trade. So if it comes to around Rs 790, you buy and then you play closer for back to Rs 900 range. That is possible and I think that will be in sync with the market. Suppose the market were to correct to about 4944, which is the 50% retracement, then Reliance should correct to about Rs 790, and then simultaneously, suppose we held 4944 hypothetically, and bounce from their back to this 5200 range, that should help RIL also bounce from Rs 790 to Rs 900. So I am trying to play it more in sync with what I expect Nifty to do.

Q: Even for a trading bounce would you play anything in aviation- Kingfisher or Jet Airways ?

A: If you look at the overall set up, it's so weak that it's more trading on news. There is lot of news floating around that I hear, I don't know if it's out in the market, that British Airways maybe taking a stake in Kingfisher. So there is lot of news flow in the market and the stocks are trading 7-8% based on that kind of news. Rs 25-26 is the key range for Kingfisher, so even if it comes there, it warrants a sell because overall, the set up is so weak. I don't think aviation is good right now. It reminds me a little bit of infrastructure. Six months ago, when Lanco was at Rs 30-40, GMR too was around that, we were talking about if it has bottomed out and I said you would get these stocks six months later at the same price.

Unfortunately, yes you are getting them, but at even lower prices. I think aviation is a similar pack where you might get this sharp trading bounces, but four-five months down the road, I think you will get them back where they were last week or last month at their lows.

Q: A quick trading call on Hathway Cable ?

A: I don't track it but since it's been in the news, I looked at the chart yesterday. I think this sharp move, even though it is coming off sharply last couple of days, it would warrant at least a trading bet. So Rs 112-100 is a good support zone where the stock should stabilize, and again, move fast back to Rs 130-140 range. For a trader, you can make a quick buck out there.

Q: Can you lay on a trade at 5080 on Nifty or you have to wait for sub-5000 levels to do that?

A: It is a top pick, yesterday we were at 5010, today we are at 5080, and 70 points higher probably your risk is little against it. If you are going long, specially, the risk is then more tilted to the fact that the market can dip again. I think 5100-5110 for today is a key pullback target if you take 5160 as the high, couple of days back and yesterday's low of 5010. So maybe, if it comes back to 5100, it again starts to correct and probably, at this point, it is no trade zone.