Equity mkts entering seasonally bearish phase: Barclays

Indian indices witnessed a dramatic fall in the last two sessions on the back of weak global cues and political uncertainity in the country. According to Dhiren Sarin, Technical Analyst, Barclays its not just the Nifty, but most Asian markets are looking vulnerable in the short-term.
"The Nifty is approaching 5660 which is a year-to-date low. After a break below that we would expect to see further selling interest," he said in an interview to CNBC-TV18.
He further pointed out that the equity markets are entering a bearish seasonal period and in the last three years markets have corrected during April-May. 
"Into the year end one can start to see a rally of another 10-15-20 percent.  We are a bit cautious for the time being. We do view the move as corrective and temporary, but it is not the time to get too bullish just yet," he added. Also read: Global mkts stable; Nifty may see temporary pullback Below is the verbatim transcript of hisinterview to CNBC-TV18 Q: US market keeps hitting new highs, but the Nifty is not quite tagging along, is it? A: It is not just the Nifty, if you look at the Asian equity complex it is all looking quite vulnerable in the short-term. The Thailand stock market, Philippines, Korea, specially the leaders like Thailand and Philippines have been up 30 percent over the last five-six months. They have pulled back and starting to show signs of fatigue. So, the Nifty is following suit. We are seeing the Nifty approach, some important support here around 5660. Those are the Year-to-Date lows, as pointed. A break below that we would expect to see further selling interest. This is a phenomenon that is of its own accord because US equities in contrast are still looking okay and that is quite diametrically opposite. Q: What does it suggest to you when a market does this technically? We had a fall post the Budget, then the sharp recovery all the way to 5900 and now a contraction again. This market seems to struggle with every pullback. A: It is seemingly a weak market. Every rally we have seen, the investors come in and sell quite aggressively. The most recent point where that happened is around 5800 in the Nifty. So, if we do see any bounce it does seem to be a short-term downtrend in our view. I guess the question is where do we base and where can we get more bullish again. Once we get a dip lower through 5660, we have some long-term moving averages coming in around 5620 and then 5550. Potentially, in that zone we can start to look for some sort of a bounce and recovery. Q: What is the medium-term picture looking like? Is it just a short-term pullback of the bigger rally that we saw over the last six-nine months or is this a potent of a weaker trend to come? A: We must remember this is equity markets entering a bearish seasonal period. April-May in the last three years, we have had stock market corrections. This is not uncommon. We are getting into this Q2 weak seasonal period. Ultimately, what we have seen is the market recovering aggressively after a correction is done. Into the year end one can start to see a rally of another 10-15-20 percent.  We are a bit cautious for the time being. We do view the move as corrective and temporary, but it is not the time to get too bullish just yet. _PAGEBREAK_ Q: How does this sit with what you see happening with currencies, specifically the Euro-Dollar? Whether you see the rupee heading for lower levels? A: It is interesting you mentioned currencies, because we do think this is a strong driving factor of global sentiment. Over the last month and a half we have seen strong dollar strength. This has pretty much been across the board, mainly against Yen, Sterling and now also against euro. This is undermining sentiment in the form of commodities pushing lower, equities starting to struggle. We are starting to see stronger US dollar affect sentiment and psychology, the market turning more negative. For a positive biased return we would have to start to see a strong dollar selloff. That catalyze an easing of the pressures we have seen. Euro-Dollar itself is key in this equation. 1.3030 is on the top side and 1.2875 on the downside. For the time being it is quite range bound. However, we do suspect if the market starts to close below 1.2875 in Euro-Dollar that will spell bad for equities. Q: What do you expect to see in gold? That has become volatile in the light of the recent news from Cyprus etc.? Do you see USD 1,600 broadly holding out, ballpark or lower levels for gold? A: Gold has had some big years in the past, but recently quite lack luster, quite range bound. The base of that range is around USD 1,530. In the bigger picture we would still be looking to buy dips against those range lows. We cannot get too bullish on this market either. It has not shown any meaningful signs of traction. If we do see gold recover above USD 1,640-1,650 area then maybe we can start to target USD 1,700-1,800. Those will be the triggers for getting more bullish in this market. Q: Do you track any of the heavyweights within this index? Which ones look most vulnerable or most likely to pull the market down? A: The one that looks more vulnerable to us in the US equities is the technology stocks. We saw a bearish reversal pattern over the last couple of days. It just seems that the market could correct lower. It remains a question whether the rest of the market can start to follow-through and these small signs turn into a waterfall where all of equities in the US start to cascade lower. It has not happened yet and it is far from happening, but if there is one equity sector that is little bit in doubt it is the technology one in the US in the short-term.