Play for a pullback, but be careful around 5730-5780: IIFL

The Nifty fell sixth day in a row and closed at 5651 levels on Friday. However, the markets began the week on a positive note, with the Nifty trading high at 5,700 plus levels. Anu Jain, Senior Vice President at IIFL Private Wealth Management feels 5600-5550 is likely to be the support zone for the Nifty.

She feels that if one is playing for a pullback, then 5730-5780 is the zone to book profits and if one can hold on to 5780 by the week then the trend will get slightly better. She expects a 100 point Nifty pullback and then from there traders need to be have to be careful she added. Also read: Nifty has resistance at 5690-5740: Aditya Birla Money Below is the verbatim transcript of her interview to CNBC-TV18 Q: How would you approach the expected bounce in the Nifty given the cues that we have this morning? A: We were at these levels two-three weeks back also and we were saying that it is oversold and it needs to go back. It went back as fast as one could blink the eye and then it came back again. The fact that it has come back again is technically proving one thing that there is very strong resistance at higher levels. This level of 5600-5550 is going to be a support zone till the other world markets are holding on. Given that we have reached that zone on Friday and we are showing an SGX plus 35-40 points, it is definitely going to bounce back. From what we saw on Friday it looks like 5734-5735 is going to be one resistance and if we can hold that then 5780. If we can hold on to 5780 by the week then the trend gets slightly better from where we are right now. However, given that we have been around these 5600 levels, right now if somebody is playing for a pullback the 5730-5780 is the zone that they should look at booking some profits. Getting out of the market and seeing whether it is a market to short or to go long.  From the kind of stocks we saw move on Friday, probably Bank Nifty, which is really oversold may see pullback and more on the private banks. So, banks like Yes Bank and Federal Bank are looking positive. It would be a follow up on that. Some of the PSU smaller banks would also probably look up. Thus, one is looking at a 100 point Nifty pullback and then from there we have to be careful. Q: Which are the pockets that look prime or ripe for the pullback? As you said the Bank Nifty was down 5 percent but many other high beta sectors cracked quite a bit last week. What else could help the market? A: Midcaps don't really reflect on the Nifty. However, midcaps are the one which have taken a hit not just now but it has been three rounds of hit. If one looks at Delta Corp, it did a 13-13.5 percent on Friday and that is an indication of how pullbacks can be very sharp. So something like a Delta Corp or that whole sector of digitalization, this is going to benefit, whether it is Sun TV or Dish TV which looks good. Any of those stocks which are in the midcap sector, the PSU banks can give them very sharp rallies for a day. People may think that this is going to be a miss rally. Well it can give you that and then at 5730-5780 one may again wonder. So, yes a pullback for traders definitely on the cards but a little careful at 5730-5780. Q: In the last six-seven trading sessions the only stock that has managed to not see any losses is ITC. Would you continue to back that name? A: That continues. Infact that whole sector, over the last one week had IT managing to hold on with small losses, pharma index managing to hold on. However, it is the FMCG stocks which are looking like they can still do another 4-5 percent. Probably, it is just a move within the sectors to go to find shelter, but that reflects technically into giving a breakout. Now ITC is holding on over those Rs 300-304 levels. It basically moves out of that zone, which it was earlier when it moves over Rs 298. So with Rs 298 as a stop loss you can play over a longer period of time for people who are invested and who want to look at it as an investment. It looks like it is a breakout for Rs 345. However, if one is playing it for a trading bounce especially if the market stays volatile with a negative bias then this is pulling towards Rs 325. So, though it may move slower when there is a pullback into the high betas it would probably pick up when there is negative bias on those stocks. So, it is poised towards that level of Rs 325. Apart from that Godrej Consumer, GSK Consumer, Hindustan Unilever all the three are also showing positive bias. So, it is not just an individual stock which is showing strength. It is the entire sector, which has managed to hold on because that is where the money comes into and people run for safety. Q: What is your favorite short from the ADAG pack? A: When the first round had happened, we had got a short call on Reliance Capital and then it far outperformed on the lower side then what we had expected it to do. Then it became Reliance Power and Reliance Infrastructure. If the market were to go back to 5780 and we would probably see that there is something coming on the short side again, it would be more Reliance Infrastructure then the other two because with the second round the breakdown has been far severe. We would obviously need to see the levels to get into. So, I cannot really give you a stop loss and a target at this point. However, at that point if I had to look into it then that would be the stock. Q: Till last week the market had completely broken down, there didn’t seem to be that much strength in pullbacks. On a medium term basis where would you say this market is trending towards? A: This has become a trading market more than a market, which is very strongly trended towards either direction. So, one comes to 5600 and gets support, one goes towards those 5900 then one is moving in a 300 point band. Either ways, the market to give a breakout would mean that there has to be some major event. Nothing looks on an annul over the next one-two weeks. So, at least for the next one month it continues to trade between this 5650-5950. It is only when one can close 5950 either on the positive side for whatever reasons or 5650 fresh trades would come. However, given six-eight month there is a fair amount of chance that even on a bad market style 5400-5350 would be the bottom. Last year we made a bottom of about 4550 that would amount to about 5200-5300 this time. It is only when one can consistently stay over 6000 that new highs would be, but I don't really see that till the end of the year. So, it is going to be range bound and a trading market, so it is advisable to keep booking profits and be able to play both sides for the entire year.