Market breadth deteriorating despite high swings: Jai Bala

Below is the edited transcript of his interview to CNBC-TV18.

Q: The Nifty has been quite steady over the last few days though it's not successfully cleared the 5,400 congestion. What do you expect it to do next?

A: It is very important to note the market breadth when the market is moving up. The market breadth of the market has been deteriorating. When the market is rising the participation has been quite low and with each new swing high the broader market participation has gone down, which is a bad signal for the markets.

Three weeks ago, I mentioned that the market presents last opportunity for an investor to move out if he is going long in this market which still seems to be the case.

The market could push itself all the way up to 5500 level or the market has already topped on Friday, one of the two will happen. If the market closes below Nifty 5290, then there is a possibility that the market will come down to Nifty 4900, and then rally back one more time closer to 5300. But if the market exceeds 5500 levels, then we need to work at alternate possibilities.

Q: The global setup has been quite supportive as well. Do you see any cracks opening up in the global charts?

A: When you look at the global picture it's always hope on or hope off. It's never risk-on or risk-off. Slovenia's CDS is now again hitting an all-time high. The problem with global set up is that when you fix one end, another hole opens up on the other end.

In the US markets, both 30-year and 10-year bond yields have started to rise. Bond yields rises either in good or bad reasons. Ireland, Spain, Portugal and other European markets are the wrong reason for rising bond yields.

There is a misconception with the market that the US bond yields are rising because the economy is quite strong. But the 30-year US bond market chart shows that the situation is very precarious.

Although at this point in time the market looks promising, the run up in the US markets could continue for a while, but the realization will happen a little later. So the setup actually negative.

Q: Are you bearish on Sesa Goa?

A:  Yes. The decline in BSE Metals Index to the May lows was an impulsive directional setup and there has been three step process recovery. The BSE Metals Index has declined to 9700 odds. Sesa Goa is one of the weakest stocks. The stock has been moving sideways. If one can place a stop loss of Rs 196 then this stock can decline to Rs 165 or lower.

Q: You have a sell call on NTPC today?

A: Correct. The decline from Rs 190-135 in technical parlance it is called as an impulsive decline and the ascent from Rs 135 has been a three step process. This is a classic corrective ascent and in this week if the stock falls below last week's low of Rs 167 then the stock is headed towards Rs 135 odd in the short to medium-term.

Q: From a trading perspective, if we do start-off flattish around 5350 level what triggers would you be looking to add positions?

A: It is better off being stock specific at this point in time rather than taking a bet on the Nifty. Selective stocks like Reliance and Hindustan Unilever are pulling up the Nifty, so you are better off taking stock specific bets on the short side. If the Nifty hits below 5290 or 5320 levels and if one is aggressive then a short positions on the Nifty can be created.

Q: What can you gather from the chart of Reliance after crossing Rs 800?

A: For Reliance the short term looks quite strong. If it can negotiate the resistance around Rs 858 or Rs 860 then there can be a strong move beyond that. It can be either way right now. The medium-term is quite unclear, because the move from the 2008 lows to the 2010 highs can be interpreted in multiple ways. So we are waiting for clarity. The short-term is strong. It is ideal not to create short positions at this point in time.