Nifty may see 5740-5800, but be cautious: cashthechaos.com

Also read: Focus on banking sector, individual stocks today, says Sudarshan Sukhani

Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Sonia Shenoy.

Q: There has been a sudden change in the sentiment in the investment fraternity, but technically how would you approach the mood in the market?

A: Let me sum it up in just one sentence. I think the party is clearly with the bulls, but don’t get into the middle of the party, stay near the door. I think very soon there will be a stampede. If you are in the middle of the party, you will not have a chance to get out of the door. So, stay with the bulls for the short-term, but stay near the door.

Let me give you the reasoning behind this. When QE2 was introduced in November 2010, several Asian markets like Hong Kong, Singapore, India, even the CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa) markets topped within one week of announcement.

If you look at the global set-up, Operation Twist was introduced on September 21, 2011 and if you look at the 10-year note of the US and the 30-year notes, both of the yields are higher than what it was on September 21. So, by this yardstick, the bond market is telling whatever the Fed is attempting to do is an epic failure.

I had also said several weeks ago, look at the 30-year bond yields, they are going to go very high. If you look at QE1, QE2, the 30-year bond yields have always gone up to the five-year moving average every time after the introduction of QE. The five-year average for the 30-year bond yields is at 4.3-4.4%. I am very sure it’s setting up for that kind of move now. Once it reaches that kind of level, the realisation will dawn on the market.

You have to be very careful here. The short-term momentum will carry this market little higher. If you look at the winners on Friday, stocks like Sesa Goa, Jindal Steel, Hindalco hit 52-week highs. There is no leadership in this market. Be very careful. Keep the party on for the short-term, but don’t get into the middle of the party, you are going to get stuck.

Q: What kind of targets do you see in terms of the upside that the Nifty can reach? Where would you keep a stop loss on any long trade at this point?

A: The floor has clearly moved higher. The 5,490 area is going to be very important. For the medium-term, 5,300 is a bull-bear divide. On the upside, I think this market has potential to go up to 5,740, maybe even on a stretch to something like 5,800, but be very careful. Don’t overstretch yourself.