Next target for Nifty is at 5300: Anil Manghnani

The Indian market has been resilient over the last few days. In an interview to CNBC-TV18, Anil Manghnani, Modern Shares & Stock Brokers says, the news in India seems to be positive with the government starting to give clarifications on GAAR and other issues that were pending. "If we can take out 5,200 then the next logical target will be closer to 5,300," he adds.

Also read: Nifty may touch 5400 in July, says Sudarshan Sukhani

Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q: We have got a big global pullback coming. How do you think it may play out for our market?

A: I am not a big fan of government intervention in equity markets because they only worsen the situation. I think what's happened today is very important because the euro was right at a major support around the 1.2450. If it had closed below that, it was opening up for a bigger fall. So, obviously this bounce to 1.26 does help that chart for sure. But how long it will last? That is anybody’s guess. So, we will have to see the follow-through of the EU Summit over the next few days. It was important that the euro bounce from there otherwise it could have easily broken the recent low and headed to even 1.20-1.18 levels. So that’s an important path for the market.

For our own market, for a while we have been saying it’s been very resilient. With what’s happening globally, with the rupee at 57, the Indian market wasn’t cracking at all. It probably had something to do with the call and put writing. There could have been a lot of calls written in the June series at 5,200 and a lot of puts written at 5,000-5,100. That’s why the market remained in that tight range. Obviously, now that we have managed to withstand all the pressure from Europe or from the globe and held out, the first target would be 5,200. That has been the major resistance for our own Nifty. But obviously if we can take out 5,200 then the next logical target will be closer to 5,300.

Q: Technically, if we do breakout above 5,200, could we go to levels that people are talking about, 5,400-5,500 or are these very aggressive targets?

A: I would for the time being atleast work with only 5,300 because it’s still a major retracement of the entire move from 5,630 all the way to 4,770. The major 61.8% Fibonacci retracement comes at 5,300. The news in India seems to be positive with the government starting to give clarifications on our own problems like GAAR and other issues that were pending.

I think the global scenario is still not clear. Remember the US markets have not really corrected. They have had a fantastic rally right through last year even while we were collapsing. The high was 1,422 for the S&P. So, even today let’s say they open at about 1,340, they are only 80 points down from there. They still might have one more leg on the downside. Probably I am looking at 1,303 as the key level for the S&P now. If it takes out 1,303 then I think it will break this 1,266 level which it hit last month. The American data, which was great throughout last year, is beginning to weaken. They had a fantastic earnings season right through the last four-five quarters. This morning I see RIM is down 15-16%, Nike is down 8-9%, and Ford is down 2-3%. If their earnings season turns out to be a little dampener then the US market, which has not corrected in sync with the rest of the globe, might go down even and break this 1,266 on the S&P.

How does that affects our Indian market? Only time will tell, but it will be difficult for us just to keep rallying and the globe starts to head south. If the euro is supposed to crack, it’s going to crack regardless of what Merkel says or whoever else says. So, yes, you might get a short-term bounce, there will be some short covering because nobody was going into the EU Summit with great expectations, but that maybe short-lived. We have seen in 2008, USD 840 billion at the US did nothing for the Dow. It collapsed from 11,500-6,600. I am not saying that will happen. But I don’t see how government interventions play out in the long run. They are only short-term boost for equity markets.