Nifty inching towards first major level of 5420: Manghnani

From a positional trade point of view, 5,200 remains the key because the market broke out from that level, he said.

Below is the edited transcript of Manghnani’s interview with CNBC-TV18. Also watch the accompanying video.

Q: It has been quite resilient over the last couple of days, what kind of upside target would you set on the market now?

A: It is still inching to that first major level of 5,420. So once we get there, we will have to reevaluate what the market is doing. A couple of weeks back I felt the bank Nifty was sort of stalling and now just performing in sync with Nifty.

But yesterday it has crossed the key level of 10,690. Now the next target is back to the February highs of around 11,200. So I guess the Bank Nifty is going to be the key component for the market and that is going to lead the market higher.

Maybe the disappointment would be that of a typical Indian bull phase, you like more leadership and not just one sector, so hopefully maybe around 5,420 mark if we can see more sectors coming to the party.

I am not saying they are not moving, but they are not moving in sync with the Bank Nifty. The market is single handedly being led by the bank Nifty but it will be nice if you saw some more participation across sectors.

Q: If you were staying with a long trade now, where would you keep a stop loss, below what level would you start worrying about this uptrend again?

A: It depends on what kind of trader you are. If you are a day trader then it becomes 5,280-5,270 where the market keeps bouncing from. But from a positional point of view, I still think 5,200 remains the key because that is where the market broke out.

Even if you look at the FII numbers that are being largely spoken about today, all that buying actually started only on the first trading day of July. So that means throughout the entire rally from 4,800 right upto 5,200 they didn’t participate at all.

The Rs 6,500 crore is all come in July. The market closed at about 5,280 in June end. So, that means all the money that has come into the market atleast on the FII front, has come in at 5,300 which would explain the resilience of the market because that is where the fresh money has come in.

If they are still buying at 5,300, you could expect that buying not to fizzle out anytime soon. So, a deeper stop of 5,200 atleast from a positional point of view will be the correct way to go.

Q: One of the buys in your list today is Crompton Greaves. What is your view?

A: I just felt after long time, this stock was doing nothing and was weaker around Rs 120-110 range, but after a long sort of consolidation in that zone is sort of breaking out right now.

Maybe if you get a dip today back to about Rs 129, I think Rs 129 to Rs 125 is a good support area with a stop which is Rs 124 is a 20 day moving average (DMA). I still feel Rs 135 is the first resistance where it has fallen from recently, but it has legs to stretch maybe if the market were to hold right upto Rs 142.

Q: We have been talking at length about the bank Nifty, for the series would you set some kind of target on it in terms of how much upside or how much leadership you think it can provide?

A: It has closed above 10,690 so 11,200 but the interesting part is the component. It has started the rally at 4,800 largely on State Bank of India (SBI) alone, but it is amazing that SBI was at about Rs 2,220-2,230 even at 5,150 levels and 200 points later it is there only. So, the leadership has moved now to the private banking led by ICICI, which has given a fresh breakout around Rs 910.

I gave Axis Bank as a call last week because it hadn’t move, that starting to move. HDFC Bank is at life highs. But you would expect at some point, even SBI, which was the major leader of this rally to resume its uptrend. It has gone more into sideways movement.

So, Rs 2,315-2,320 would be the next target on SBI and then we could look higher. So, initial breakout will be led or will be based on private banking. But then at some point, if the Bank Nifty has to go all the way to 11,200, you would expect participation even on the PSU side.

Q: You are buying something like a Zee despite yesterday’s sluggishness?

A: From a monthly perspective after long time this stock has shown some breakout on the momentum indicators. It is pulling back which gives us an opportunity to buy maybe from Rs 139 all the way to Rs 135-134 and keep a stop below that. I do know that Rs 151 is the major hurdle for this stock, but long-term is setting up for something better.

Q: How are the IT charts looking before the Infosys results tomorrow when you look at the big ones?

A: I keep getting TCS wrong, every time I say I think it is going to go down, the stock again bounces back. I am just sort of gearing myself to believe now that anybody who wants to buy largecap IT is so scared of Infosys post the last numbers that it sort of become alternative when you just go and buy strictly TCS.

Recently, HCL Technologies has made a come back post all the news about their head quitting or not quitting, selling his shares or not selling his shares. All that is behind them now so that was one of the stocks that did pretty well when Infosys fell last quarter all the money moved into HCL Technologies and TCS.

So, those two stocks will still hold on till you don’t get enough clarity from Infosys. If Infosys can maybe post better numbers or come out of something more comforting this time around then you could see money again flowing out of TCS and HCL Technologies back to Infosys.