Nifty support at 5060; look to buy on dips: Manghnani

In an interview to CNBC-TV18, Manghnani says that 5060 will hold strong as a base for the index. “But having rallied 200 points, I wouldn’t be surprised if we gave back and may be did a 50% retracement back to 5130 and then again started the up move,” he added.

However, even though the indices may perform, his advice is to bet on individual names that have outperformed the market.

Below is an edited transcript of his interview with Udayan Mukherjee and Sonia Shenoy.

Q: Oil and gas had a good showing yesterday, both ONGC and Reliance . How would you approach those two this morning?

A: I think Reliance is the interesting one more so because if you look at it now it is outperforming relatively the market. The last two months the high was about Rs 743. So now with the index at 5229, still about 100 points odd from the high of 5348 we saw couple of weeks back, Reliance has already passed the price it was at that particular index. So clearly outperformance is there.

I don’t know about the overall set up from a longer term view, but from a shorter term view it clearly looks like it might outperform the market. I expect this rally to continue to about Rs 760-765. That is going to be the first test because if you look at Reliance over the last year or so, the 50 day average is consistently trading below the 200. So every time the market has rallied, it has found resistance right at the 200 average which is around that Rs 765 mark. So I believe it will outperform going forward.  But, I want to see what it does at Rs 765 before taking the next bigger call on Reliance.
 
ONGC I think is stuck in a range. Every time it comes to Rs 290 you see some profit booking than back to Rs 270 you see buying. So I am not sure if there is a major pattern developing out there. Still looks a little range bound to me.

Q: What is the call on the market now, how much more would you give this pull back? It has already come back a couple of 100 points from its recent low.

A: Yes I think it is an interesting one. I still believe it is in a trading market, but the moves are quite sharp. On Thursday, everyone was all gloom and doom saying we were closer to 5000. In three days we have rallied 200 points. Purely from a technical level we are right at 5228, which is the 61.8 fibonacci retracement of the recent high 5348 and the low of 5032.

But I think this market is more now filling up gaps. It had 2-3 gaps on the way down, and two have been filled up,. There is one more gap left at 5300 when we opened gap down a couple of weeks back. So till that doesn’t get filled up I think we are in a trading range.

One thing I’d like to say is now 5060 becomes the major support. Yes it did breach that, but I think may be we can ignore that because it was settlement. But now if you go and test or break 5060 then you have a problem. So for the time being buy into every dip with a stop loss of 5060. But having rallied 200 points, I wouldn’t be surprised if we gave back and may be did a 50% retracement back to 5130 and then again started the up move.
So may be at this level I’ll probably be little more cautious because we are in a trading range and we have rallied 200 points.

But the beauty is stocks are doing their own thing. There are enough stocks that are in a proper trending where the market might not be so much trending. Look at ICICI Bank which is at a new two-month high. You look at Zee Entertainment is doing very well. The whole cement pack be it ACC , Grasim , Ambuja , Ultratech , they are all flying away. So stocks are trending nicely. May be the index is still trying to find a breakout above 5300 or a breakdown below 5000. So may be we are stuck in that 300 point range right now.