Market to consolidate at 4800-4840 levels: Sukhani

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The market has been slowly but steadily gaining inch by inch over the past week, but Sudarshan Sukhani of s2analytics.com tells CNBC-TV18 that it is time for Indian equities to consolidate. "I don't see much of a follow through today," he said.

 However, he does expect the December series on the Nifty to end on a higher note.

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

Q: We had a good day yesterday. How do you see us follow through today?

A: I don't see much of a follow through today. We had a good time yesterday, but we also reached a level of 4,800-4,840. So now we are probably going to be choppy and consolidate.

Q: It an extremely long series that we will wind-up this week. What kind of call would you take going into the next series on the Nifty purely?

A: This one seems to be heading towards a close that should be higher and January will probably be seeing a much lower close.

Q: Areva T&D is something you like and that's been a good mover, it gained some 12% in the last three days?

A: Yes, it's also fallen from Rs 225 to Rs 125 so we have to keep it in context the gains. These gains are not just for Areva, but for all sorts of midcap and smallcap stocks. What we must remember is where they came from, where they fell from. In case of Areva, there is certain amount of quality; it's been moving up back to back for the last four days and that tells us that there is some genuine buying here and it certainly is deeply oversold.

So if the market remains choppy, some stocks will go up just as some will go down. My sense is Areva has more upside left and its one of the better stocks. You can trade it in the F&O and in the equity cash market also. I would say it's a buy for today and probably for the next couple of days.

Q: We were talking about the weakness in Ranbaxy ; you have a sell call on it today?

A: Yes, Ranbaxy's weakness is persistent. It had a one day rally, but that fizzled out yesterday when the broad market was going up, so this is in a sustained downtrend. I think my targets are Rs 388-389 for the current move, that is today or tomorrow, but that's not the end of the down move. Ranbaxy is in a big bear market of its own and its adding strength to that bear market, so it's not something you want to buy. It's probably one of the safer sells.

Q: What about your sell call on McLeod Russel ?

A: McLeod Russel also did not participate in this three-four day rally. It first fell on the back of news which apparently was not correct, but it didn't even bounce back. Yesterday it saw significant lows before it closed a little better, but that's not enough. The fact is that it's underperforming the broad market. After breaking the Rs 200 level, it' moving down steadily and I suspect it's again in a bear market of its own. We are looking at Rs 180, but I don't think Rs 180 will finally hold, it should go lower.

Q: You are long on some of the heavyweights like HDFC today?

A: Yes, HDFC is a buying opportunity. Every time the Nifty looks like it will go up, the first thing a trader should do is to go long in HDFC; it's not a good stock to go and sell. Yesterday's rally just brought it to a resistance level and if the market dips in choppy trade, HDFC should breakout and see higher levels today. I would expect it to eventually reach Rs 700 by the time this series end, that's another three days.

Q: Tell us about your buy on Bombay Dyeing this morning?

A: Bombay Dyeing is mimicking the Nifty. It made a double bottom just as the Nifty went lower; we went lower than 4,640 but Bombay Dyeing held on to Rs 325 levels. Its' bouncing back very nicely with two large range days, which means two days on which it gained significantly in the last four days. So its doing all the right things for a stock that looks like its hit the bottom.

Yesterday's gains should be built upon today and probably in the next three-four days. Eventually we should see it touch Rs 400 and cross it. Bombay Dyeing among the midcaps is a far safer stock to go long in today and for the next forthcoming days than GMR or Lanco or so many other names.

Q: What about your buy on GAIL ?

A: GAIL has a very interesting chart, it's in a trading range that it has not broken out of it. But the fact that it was in a range while the Nifty was falling and doing all sorts of ugly things on the downside tells us that there is intrinsic relative strength in GAIL. The stock breaks out only above Rs 405 and that's a target for my buy today. Position traders should wait patiently and if it goes above Rs 405, you want to hold on to your position rather than exit; at least partially you should hold on to it.

So a trading range breakout in GAIL will tell us that much more upside is left, maybe even Rs 450. This is a stock you want to hold not only for today but you want to track it for the next few days also.

Q: If we do open at 4,780 level, how would you take it forward?

A: I would not buy today. If there were any positions which have been carried forward, then trade would be for those positions to exit at any rally. I expect the market to be either choppy and see some kind of a dip today.

Since we are in a short-term uptrend, selling is not a good idea and buying should be done only if we reach 4,740-4,730, which means we need 30-40 point dip before I would consider going long. Going short today is also not an option. My stops for these trades, the short-term trades are about 4,690. So if the market in the very unlikely event goes below 4,690, any long positions taken should be closed immediately.

Q: You were making a point earlier about much deeper downside in the next series. What kind of range are you working with for January on the Nifty?

A: For the slightly longer-term, which means the intermediate term trend, I am assuming that 4,540 will breakdown. 4,530 for the Nifty was the low that we made and I don't think that will hold. So we are looking at a slide below it towards 4,400.

The upper end is something we will find out in the next ten days, somewhere at 4,840 where there is significant resistance or 4,950-5,000. Whatever rally we are going to see now should be the upper end and after that we should see a decline to 4,400.

Q: How would you trade Idea ?

A: I would sell it because inspite of yesterday's rally, which was on the back of the 3G news, Idea's charts are suggesting significant correction is still left. We are going to see Rs 60-61 in Idea so it's a short sell. A target of Rs 74 is possible, but it's not a buy at all.

Q: What about Crompton , do you think it's bottomed out?

A: I think there is a trade on the long side which means if this market goes down again, these stocks will fall much further than where they are. So we don't know if it's bottomed out, but for the time being a relief rally, a correction is in the offing. The correction on Crompton should be enough to justify taking a long position in it, so Crompton for a short-term trader is a buying opportunity. We are looking at Rs 132-135 target and it's a buy.

Q: Would you buy IFCI as well because fresh longs were seen on that too yesterday?

A: See there is a difference between what I would do and what the charts are saying. The charts are saying that IFCI is a buying opportunity, but I would never trade in IFCI because it's a volatile stock and I have not found out what it does. But purely on the charts, there is buying there and addition in open interest. The target is Rs 25-26 for the stock and for somebody who does trade IFCI can go long.

Q: Is there a long trade for you on VIP ?

A: No, it's a short trade inspite of yesterday's rally. We have to see these rallies in context. VIP fell from Rs 200 to Rs 75, so it is going to do something on the upside. It's not yet a buy and in fact by the time this bear market ends, VIP will be at much lower levels. So VIP is a sell, we can look at a target of Rs 76, keep a tight stop loss and if this market were to go up we could find VIP again retreating.

Q: What is the call on Hexaware today?

A: Hexaware was a very big disappointment for me. A stock that promised much higher levels is now breaking down from significant support levels. Tt has already broken down from a major support at Rs 80 and now that is going to act as resistance. We are looking at Rs 73 in the very short-term in the next couple of days and then lower levels for Hexaware.

Q: What kind of targets are you seeing on the rupee now?

A: The rupee target is still 55, nothing has changed and then 58. All these corrections will come. What we are seeing is a correction in an ongoing bull market for the dollar.

Disclosure: I have no personal holding in any of the stocks discussed.