SENSEX NIFTY
Jun 06, 2012, 11.11 AM IST | Source: CNBC-TV18

See short-term rally before Nifty falls to 4500: Manghnani

Anil Manghnani of Modern Shares & Stock Brokers tells CNBC-TV18 that the market will stage a pullback rally before crashing to 4500 levels by Diwali this year.

Anil Manghnani

Analyst, Modern Shares & Stock Brokers

Expertise : Equity - Technical

More about the Expert...

Anil Manghnani of Modern Shares & Stock Brokers tells CNBC-TV18 that the market will stage a pullback rally before crashing to 4500 levels by Diwali this year. “The damage in stocks does tell you that maybe down the road 4500 should come,” he said.

For the medium-term, however, Manghnani is playing for a pullback to 5000-5100 levels. His view is that the rupee will start to recover a little, which will trigger a rally in the stock market. “My belief is that the damage on the rupee has been done, at least for the short-term. So I think if the rupee does pullback to 53.5-54 levels, that should allow the market to inch back up,” he explained.

He adds that the Nifty’s resistance to fall below 4750-4800 is another indicator that upsides are available.

Below is an edited transcript of his interview with Sonia Shenoy and Mitali Mukherjee. Also watch the accompanying video.

Q: How would you approach the index today?

A: Although the market has been weak and we did go and make a new trading low on Monday, the market pulled back by the end of the day and that was a positive sign. Yes the FII figures still remain quite poor, but now you have two sides of the market.

You have one where the Nifty keeps getting protected at 4750-4800, but on the other hand you have the breadth where many of the smaller names or midcaps names have gone and made either 52-week lows or life lows or broken what prices they were at when the index made a trading low in December.

So I think maybe the breadth is poor, but the Nifty is being protected. So if you are a Nifty only trader, I think that’s a good sign. The first target to watch out for in this pullback would be about 4925.

Q: What is the market is doing in this period? Is it looking like relative resilience or is it trying to mark time at a particular level and not crash back to that 4500 zone? Or do you think that crash is coming, but it’s going to be a slow crumble down?

A: I think probably what you said last. I think it should come actually, but I for one had believed that it would happen maybe later in the year closer to Diwali. So I am a little surprised that it may slash in June because the fall has been quite severe. I expected a more stable May-June and then a collapse towards the second half. So I think 4500 is possible later in the year, but I probably would hope for an up move closer to 5000-5100 first.

My belief is that the damage on the rupee has been done, at least for the short-term. It needs to pull back to about 54.30, maybe even 53.5 a dollar and that would help the market. Let’s be honest, it’s been clearly a rupee dominated game and the market has crashed because of the collapse in the rupee. So I think if the rupee does pullback to 53.5-54 levels, that should allow the market to inch back up and then I think the next fall would start.

The damage in stocks does tell you that maybe down the road 4500 should come. But for now, I don’t mind playing for a little upside to 5000-5100 just because the market is showing that the Nifty wants to hold 4750-4800 in the immediate term.

Q: BHEL is in a very interesting place. Fundamentally it’s been discarded quite a bit, but technically a lot of experts are recommending it. You see more upside on that particular counter?

A: Yes I see a trading pullback for couple of reasons. There is a major moving average around the Rs 200 mark, so there’s no surprise its taken support there. I think it spent a lot of time between Rs 200-210, which tells me that maybe the overall structure is still weak, but at least a short-term move back to Rs 229-230 levels is on the cards.

So I think because it’s oversold and because it’s consolidated from a shorter timeframe, a pullback definitely on the cards.

Q: Aside from what’s happening on core banking names, would you start playing long trades on some of these NBFCs because they are the ones that corrected more sharply?

A: Yes, but the problem is that REC and PFC keep going and making new lows in every fall and that doesn’t bode well for the stock. They may see a bounce because they are high-beta names, but I would probably go for an IDFC .

Every time the market goes to 4800 or lower, IDFC doesn’t go back to its lows of Rs 110. So it suggests to me that maybe a move back to Rs 135 is on the cards if the market supports. So maybe not REC PFC, but IDFC definitely looks pretty good on the charts.

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