The Nifty is in a narrow range, says Sudarshan Sukhani of s2analytics.com. “The approach should be mildly bearish,” he adds.
On Friday, the Sensex shed more than 250 points to hit an intraday low of 17,231.34, before closing the session at 17,373.84, down 129.87 points or 0.74%. The Nifty too closed down 41.55 points or 0.78% at 5,290.85.
The Nifty is in a narrow range, says Sudarshan Sukhani of s2analytics.com. "My approach is mildly bearish", he adds.
According to him, the market will breakout either on the upside or downside. He expects a big move either ways in May.
Below is the edited transcript of his interview with CNBC-TV18's Sonia Shenoy and Udayan Mukherjee. Also watch the accompanying video.
Q: We ended last week with a 1% cut on the index. How do you approach today?
A: The approach is to have a mildly bearish stance. But there is something far more important than today's approach. It is the fact that the Nifty is now trading in a range that we have not seen for the last six years. So that's the big story of the day and of the coming days.
The last time the Nifty traded for one calendar month for less than 200 points was in February 2006 and this is 2012. Now, our monthly range for April, so far, has been 190 points. So, the Nifty is actually doing nothing. That is one cause for frustration among traders because if the market doesn’t move then their trading is not going to move either.
One hundred and ninety points for the Nifty is on the back of a Nifty value of 5,000. In February 2006, the Nifty was trading at 3,000. So, in percentage terms, we are at the lowest trading range since May 2002, that's ten years ago.
Now, this narrow trading range can do either two things. One, a breakout or a breakdown is imminent. And that will be a significant move on the upside or on the downside. The second very improbable scenario is in 2002, the Nifty simply drifted for one full calendar year. That doesn't seem likely. But that's what we should be factoring in, a big move in May, up or down or a drift that will be terrible for the traders.
A: Exide was a sell last week also and this is the nature of trends. Exide was on the upside and we were upbeat on it, but finally we saw distribution pattern and got a sense that this is not working out. Short sell last week has made money and I think now the trend is on the downside. So, Exide remains a short sell.
Since we are in a trading range, take small profits. Traders should not expect big moves on either side and that applies to most trades.
Q: Would you sell Adani Enterprises as well this morning?
A: Yes, Adani has been a consistent sell. There is nothing in it. The charts tell us it is almost on the verge of making new lows. It has not done that, but I think it will.
From Rs 450 it has tumbled all the way to Rs 270 and that's in a market which has been flat more or less. So Adani Enterprises remains a short sell and the chances are that we will see it tumbling down below Rs 200.
Q: Reliance Capital has been consistently on your sell list. Do you think Friday's poor performance is signifying more weakness this week?
A: Yes, it is signifying more weakness. On Friday it made new lows for this decline since the February 7 or 10 decline started. Reliance Capital made new lows on Friday, Nifty has not done that fortunately. This is not good news. Reliance Capital in any case what we saw earlier was a bear market rally. These rallies come which is what happened with Reliance Capital. The primary trend in Reliance Capital is down. It is in a bear market still. So I am assuming that it will eventually reach Rs 300, maybe even crack that on the downside.
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