Mithil Pradhan bullish on Nifty breakout at 5200-5300

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Mithil Pradhan bullish on Nifty breakout at 5200-5300

Mithil Pradhan of Violet Arch Capital Advisors spoke to CNBC-TV18 about his expectations of where the market is headed now.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by Mithil Pradhan See what other Experts & Brokerages are saying about Larsen See messages about Larsen Larsen BSE | NSE 29/05/12 Are Mutual Funds betting on Larsen? Other Stocks in this news Reliance Communications | Bharat Heavy Electricals | Reliance Industries |

Mithil Pradhan of Violet Arch Capital Advisors spoke to CNBC-TV18 about his expectations of where the market is headed now.

Below is the edited transcript of the interview. Also watch the accompanying video.

Q: 5050 is here; what next for the Nifty you think?

A: Over the last two weeks, we have changed the outlook on the markets completely. It is now heads-up; we now expect a decent rally even from current levels. Couple of things have happened over the past few weeks, one is that Bank Nifty has violated the falling wedge pattern. What happens with this wedge pattern is that they usually come at instances where larger pattern is terminating. Nifty- we saw this pattern terminating at around 38.2% retracement and Bank Nifty, we saw this pattern terminating at 50% retracement.

I see this wedge pattern in numerous stocks, for example Larsen and Toubro , Reliance Communications , we see it in CNX midcap index, we see in the oil and gas index.... So over and over, what I am led to believe is that things are changing now; we could actually see a decent run up from current levels.

The key for Nifty right now is about 5200-5300 level. This is where the channel will break out; this is also where my make or break levels stands. So for now I stay firmly bullish at this point of time I would say.

Q: What is Larsen and Toubro's chart telling you now after the good rally in the last 15 days?

A: A lot of capital goods stocks have violated their make or break levels. For L&T, it was near Rs 1135; for BHEL it is around Rs 285-290. What is happening is that BSE Capital Goods index itself has formed a wedge pattern and it is struggling around 1% around current levels. Now if we are about to see a good amount of strength from here in the capital goods index, then I will be very comfortable and confident in saying that the trend of capital goods index is completely changed at this point of time.

L&T has moved very sharply after breaking that Rs 1135 level and we are looking at initiating long positions from whatever declines we could see. I remain bullish on the stock at this point of time.

Q: What sense are you making on the Reliance charts now?

A: The most important thing in Reliance is that in December, the stock faced double bottom break down. In spite of this breakdown, the stock did not really make any downward move. So that is a sign of strength. While it was breaking down the double bottom, it was creating a pattern which is called as diagonal.

Oil and Gas index was itself creating a diagonal pattern. About a couple of days back, the stock has violated the symmetric level which is around Rs 740-750 levels. Even if the stock has to open 3-5% gap down today, I would look at Rs 750 levels as amazing levels to initiate long positions. I am just hoping that the stock opens down and I get to open long positions in the stock.

Q: Below what level of the Nifty would you start worrying about this uptrend that it is fizzling out again?

A: Once Nifty breaks 4950-4960 levels, I think that is the time when a larger correction could be expected. But even if I expect a larger correction, I would not expect it to go below 4840 sort of levels. One thing which has happened over the past couple of days is that Nifty has broken out of 4989 which was an important make or break level. So I do feel that after breaking this particular level, after giving two closes above this level. I don't think immediately there would be a major fall.