Mkts may take 2 wks to recover: Rare Enterprise

A: I think it is a bit too early to even get into that thinking, I think it is more important that the market stabilizes first or at least the US market stabilizes first. The fact is that the market which was running on a terrific momentum here got broken twice sharply and when you have hits like this, it takes time to recover. This is happening in a situation when there suddenly seems to be instability all over the world.

I think it will take about two weeks or so. The markets started coming down last Friday and we have gone quickly into an intermediate downtrend, so it is just about a week now and typically even in a bull market, intermediate corrections tend to hold on at least for a minimum of two weeks, could be even more instances like this.

There is risk of another 400-500 points in the market as of now over the next week or so and then when things start to stabilize and volatility starts to come down, which will be accompanied by lower volumes it is then that we assess whether further damage to the trend is possible or not.

Q: Yesterday the S&P 500 apparently slipped below its 200 day moving average and then it pulled back, are you seeing signs of that much damage on the Nifty and what do you put out as a base because we keep talking about 4,400-4,350 but it slices through that when there is panic or when there is weakness?

A: I think there is clearly a shift happening in markets and we also see that there is a sudden loss and gains by the leaders of the market. The momentum stocks like GMR , India Infoline and all have suddenly broken down very quickly and clearly there is shift happening, the market has to search for new leaders.

In the meanwhile 4,400, there is no number which is sacrosanct in a market, which has suddenly turned around. So you could easily go lower than that, even in the Sensex, there is room for another 400-500 point decline till we see some kind of stability and see a shift happening.

Yesterday was the first time when I could see some fear in market participants and there was a beginning of damage in the cash group of stocks where people are wondering after selling their F&O positions, should they reduce their cash exposure. All this takes time and you have to give the market some time to take the new situation in its grip and then only make a reasonable forecast going forward now.  

Q: What is the strategy on the Nifty, do you accumulate on dips or do you expect to see more pressure and start looking for a shorting opportunity even at around this level?

A: I think one should not accumulate on dips at least till we see some kind of stability or some calmness coming back in the market or till we see some clear turnaround but I would like to wait for that at least for a week.

If I see a turnaround in the Nifty in the middle of next week or towards the end of next week or maybe even the week after that, that is when I think it would be more safer to participate or try to participate in a rally upwards because till that time where there is so much fear in the market and a lot depends on how the US markets are going to close overnight which we do not know and there is still a risk there or at least a perceived risk of the Dow losing further ground in the days to come.

Buying on dips would not be advisable, it would be better to stay out and for those who are aggressive they can use any minor rallies to sell and participate in the downtrend for at least a week or so.

Q: What do you think, Nifty will find some support around this 4,300 kind of level or is that being too optimistic?

A: I think it is still early days; we have to give it time and I would like to see some evidence. In fact, over the last two-three days I have heard opinions of many people saying that our damage could be far less than damages of US or other market comparatively but the number shows that over the last two-three days we have been among the worst affected in the markets.

There is definitely a room for some more fall at least in the near-term till we see stability and then we have to take a call from there. Nifty could find itself around 4,200-4300 over the next couple of days.

Q: What do you think is happening, do you think some of the shorts could be covering this morning?

A: In the very near-term, it is likely that the markets have gone a bit too oversold and it is not that markets are so bad that it is just going to fall off a complete cliff kind of thing, so there will be bounces after every sharp fall. We saw too much discount in the Nifty futures by close yesterday, about 60-65 points when that kind of discount happens, it shows that already too much selling has happened at least in the Nifty and people who have shorted would like to cut their positions and some pullbacks is definitely likely. It is possible that we are seeing that kind of scenario now.