Jun 06, 2012, 11.11 AM | Source: CNBC-TV18
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 (more)
Analyst, Modern Shares & Stock Brokers | Capital Expertise: Equity - Technical
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.