Indian market is in bad water with global crisis and disappointing domestic economic growth spoiling investor sentiments. However, post RBI policy move rupee has gained strength boosting the market.
In an interview to CNBC-TV18, Regan F Homavazir, Associate VP - Technical Research, Darashaw says that Nifty has its support at 4700. He is expecting the rupee to test 54 once again.
As a stock strategy, Homavazir advises selling Tata Power closer to Rs 100 and buy HUL. He also feels that Tech Mahindra is weakest in the IT sector and it may touch Rs 420. Here is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video. Q: If the market pulls back a bit from the 4,700 level, what is the extent of the pullback you are expecting?
A: It is very critical to mention that on every rise from 4,700, there has been tremendous selling. Every time that the Nifty has risen even to 5,100 or 5,200, it constantly comes to 4,700. This is a very bad indication for the market. It is likely that 4,700 will break this time. We will head to 4,200 first which will be the major target.
If we look at 1992-2000 and the year 2008, we have had a steep bull run and a serious decline which was about 60% in price value. After that, within two to two-and-a-half years, it went back to that peak. This is exactly what the Sensex has replicated even this time. We call it the 12-step pattern.
The seriousness of selling off from the retest of the previous peak is that the market declines to the 61%. In technical parlance, we call Fibonacci retracement. The long-term target of the Sensex would be 12,800 levels by that yardstick.
Around 4,200 on the Nifty would be a first major target and 3,800 could be the extent of the damage that we could be seeing. The level of 3,800 would be one massive second target and would be one mega buying opportunity at that price. We will be looking at 3,800 as our second major target, first being 4,200 and 4,700 is net several times. Q: On the way up, the resistances are getting lower. First it was 5,400 and now it is 5,100. In this pullback, do you expect an even lower top to be formed?
A: If that happens, it will be a further added confirmation to this bearish outlook. Ideally, it should happen that way. Q: Are you not telling your investors to by stocks now?
A: Not at all. Across the board, parameters are deteriorating stock-by-stock. If you start looking at the general market, even stocks which have been fairly high, their internals have started to get deteriorated very fast. It is only now awaiting price confirmation. The parameters are down. Coming to price confirmation, it will spell bearishness and some serious deterioration could be underway. Q: The rupee had a sharp pullback today to Rs 54 to 52.20 levels. How do you see that technically?
A: We have been very vehement about our view on the rupee that it will continue to weaken right from Rs 46 onwards. It has met our target of Rs 54 levels. Till the time rupee does not break below Rs 52.13 levels, it will not strengthen. To meaningfully strengthen, it will have to be breaking Rs 52.13 levels, only then can it be reassessed or else the picture is that rupee will further continue to weaken. Around Rs 54 levels will be retested very soon again. Q: What do you see for the banks? When you look at the Bank Nifty or any of the larger bank charts, what
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