Expect Nifty to fall below 5000 then resume rally: Jai Bala

In an interview to CNBC-TV18, Bala says that he expects the Nifty to move to 5350 levels if it manages to take out the resistance of 5200. “However, once the market clears 5,200, it will get even more complacent and that is going to load people on the wrong side and that is a problem for the market at this point in time,” he said.

H also says that the market will retrace its gains and fall to its December lows after hitting 5350. “From 5,350, the market will rollover to the lower side and from that point in time you can look at 2011 lows of 4,500 and levels below that,” he said.

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

Q: Are we going to be successful in climbing 5,200 or is the rally from 4,800 to 5,200 coming to an end?

A: I think there might be a bit of juice on the upside, but the problem now is we are in a countertrend rally. The problem with a countertrend rally is they can end abruptly without any warnings, but my understanding of the technical interpretation at this point is that you might see a drop to sub-5,000 and then continue this countertrend rally.

I have been doing a bit of check on the sentiments of the market, and all I could see is that there are a number of people who are convinced that the market has got limited downside or that the Sensex is going to hit 22,000-23,000 by year end. That is a bad sign in this countertrend rally. Once the market clears 5,200, it will get even more complacent and that is going to load people on the wrong side. So that is the problem for the market at this point in time.

Q: If the rally does resume after a stutter, what kind of targets on the Nifty and the Bank Nifty would you eventually think as the climax of this move?

A: The Bank Nifty is little bit weaker than what Nifty is projecting, so it at best can go to about 10,400; it’s about 9,900 now. If it does cross 10,400 there is a bigger resistance coming at about 10,600 odd for the Bank Nifty.

If you look at Nifty, the first obvious resistance is the 5,200 level. If it does clear that, I am looking at 5,350. From there the market will rollover to the lower side and the bigger trend will start taking control. Once it starts rolling over, from that point in time you can look at 2011 lows of 4,500 and levels below that.

Q: There has been quite a bit of interest on some of the gas stocks. Petronet LNG is up 7% in the last three days, yesterday Gujarat State Petronet was strong. How do you trade some of these faces?

A: At this point Petronet LNG is looking attractive at least for the short-term. The price decline from Rs 170 odd looks like it has ended at least one phase of the decline and now the stock is embarking on a corrective rally.

If the stock can manage to clear Rs 157-160, there are bigger upsides for this stock. But in the short-term you can treat this as a countertrend rally; place a stop at about Rs 127 and expect the stock to hit about Rs 155-157 odds.

Q: You are going with a sell on Hindalco today?

A: The metal sector has always been the wiping boys for the bears and I think quite rightly that’s one of the weakest sectors here. The move from the lows has been in a three step fashion that is typical of a countertrend rally and it has exhibited weakness even in yesterday’s trade.

If you can place a stop above Rs 122-123, you can expect the stock to hit about Rs 105 maybe even a new low closer to Rs 98. So I am being conservative and projecting a target of about Rs 105.