Nifty to face resistance around 5600-5700: Anil Manghnani

According to him, the Indian market is getting in sync with international markets.

Below is a verbatim transcript of his exclusive interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying videos.

Q: A lot has happened in the last couple of trading session, does it read like a turnaround in the short-term trend, atleast for the Nifty?

A: A little early to say that. I still think 5,600 to 5,700, like on the last occasion, would again be a key resistance zone for the index. So, I would like to see whether it can take that out.

The problem is when you look at the broader market, BSE 100-200 and 500 indices and even the BSE smallcap and midcap, in all five cases, the 50-day has just crossed below 200-day average. So, the whole breadth of the market is gone into a sell right now. Even the Nifty if I look at the 50-day and 200-day, the 50 exponential is just crossed below the 200 exponential. Now, the only thing to watch is whether the 50 simple also crosses below. If that happens, that is a negative sign more than a positive sign. So, I still think the verdict is not clear.

My view is if you manage to buy at 5,200. This would be the second time that we are back at 5,600. So, 5,600-5,700 in that range, I would book profits. If I have to take a fresh call then we can always re-enter after 5,700. But I think always the question or the dilemma is when it comes to 5,200, will it break below and nobody buys and when it comes back to 5,600-5,700, will it break above and nobody sells.

So, I think if you are buying and selling, you can always take a fresh call post a crossover or a breakdown. But if you don’t sell and it falls then again you are left in the dilemma of what to do. So, my call is if you were lucky enough to buy in that collapse last Thursday or even post the budget, you are getting a 300-point rally even post the budget. So, that is a good opportunity to take some profits.

Q: Would you initiate any shorts though in this range of 5,600 to 5,700 or would you hesitate to do that?

A: I think closer to 5,650 with a 50-60 point stop. I think you could fairly do that because a lot of stocks also have bounced quite significantly from last Thursday’s lows. We are you getting the feeling now, we are sort of getting in sync with international markets. I say that because you look at the last two-three days, whenever the US has rallied, we have rallied.

I think fortunately Wednesday we were close, otherwise we would have seen a shock in Wednesday. And even yesterday we got a little bit of sell off in the morning and reaction to what has happened to Dow on Tuesday. Today, we are getting a pump up on the basis of global cues. So, we maybe are getting more into sync with them, which was not the case over the last two-three months. I think there the markets are getting volatile. You are seeing sharp swings 150-160 on the Dow each day. So, now you would have to be a little more concerned about what is happening globally.

We keep talking about oil, I don’t think you can look at oil on a day-to-day basis because we were at 5,250 last Thursday, oil was at USD 102 per barrel, today we are opening at 5,600, oil is still at USD 102 per barrel, but we have rallied 350 points. So, I think it is tough to catch day-to-day movement on oil. But I think now we will be more in sync with the US markets and maybe the morning cues on a daily basis will need to take from them.

Q: On that point you were making about the pullback in the market, it has been premised on the move in banking stocks, anything over there that is still good for more?

A: I would still stick out my neck and say PSUs look better than the private. I think the volatility, especially in a stock like Axis Bank or ICICI Bank , tends to be pretty high. If you get a gap down day, it seems like ICICI and Axis are the ones to fall first. But we don’t see that much reaction on the downside, especially in the PSUs.

I think a stock like Bank of Baroda , Canara Bank , maybe even a Bank of India , these stocks still look good for some more. Sure the key one is State Bank of India (SBI). But I think SBI at Rs 2,740-2,750 is a major problem area. So, only if it can cross above that then I think it is good for some more.

For ICICI Bank, Rs 1,060-1,065 is a key resistance area. Axis Bank, I haven’t tracked in a while, but that also is trading below its major moving averages. So, till it starts to get above those averages, it might still remain in a range.