Nifty can hit 4200 if 4700 is broken decisively: Darashaw

Regan F Homavazir, associate vice president of technical research at Darashaw feels the Nifty could test 4,200 levels over the medium-term.

Moreover, if 4,700 levels is broken decisively, he indicated that the Nifty can hit 4,200 levels. "I expect rally to pause at 4,930 levels on the Nifty," he added. Darashaw expects a counter trend rally post steep fall.
Shifting his focus to the Indian currency, Homavazir mentioned that rupee can see selling pressure in the short-term.
Darashaw remain bullish on HUL even at current levels. From the infrastructure space, Homavazir further recommended accumulating JP Associates at around Rs 55 levels and said that the key support for BHEL is at around Rs 230-250 levels.
Talking about the largecap names, he pointed out that Infosys can correct to Rs 2,440 per share and ICICI Bank would trade in the Rs 575-615 range. Here is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video. Q: Will we see a short-term rally for the Nifty, having hit 4,650 levels. If yes, what could be the extent of that pullback?
A: Earlier I had said that if 5,200 were decisively broken, we would see 4,700 levels directly because there is no real support in between that band. Considering the steepness of the fall, the logical explanation to that would be a countertrend rally or pullback. The extent of the pullback on the Nifty could be up to 4,930 levels. There is a small zone between 4,902 and 4,930 levels.
The larger-term picture still remains negative for the Nifty. The key target of 4,700 levels has been achieved since the past many months and it was long overdue. If 4,700 levels get decisively broken, the step to 4,200 levels will be there very soon. The Sensex will go under 15,000 levels and the Nifty could hover at 4,200 levels very soon. Q: Is there a sense of a timeline along with this move for the index? This breach of 4,700 levels has come fairly fast for the market in the series gone by.
A: From 5,200 to 4,700 levels, multiple stocks have broken some very significant levels. If these levels start to get accelerated on the downside, the view of 4,700 levels could be attained very quickly. The extent of time cannot be precisely gauged, but it could happen soon enough in a quarter or so. Q: Some of the peers have been pointing out that the move in this market has come even before there has been any substantive breakdown in global markets. What indications do you get when you analyse the charts of the Dow and S&P in terms of immediate near-term downside risk?
A: The Dow has not broken the 4,700 equivalent on the Nifty, which is somewhere around 10,700 level. We are still above that level. The Nifty has been much weaker than the Dow in this fall. If the Dow goes below 10,700 levels, I expect a crash to about 9,000 and 9,600 levels. This is the zone where the Dow can ultimately target if the 10,700 level is decisively broken. In that case, the Nifty will not languish at 4,700 levels. It could steeply accelerate on the downside. Q: What are your long-term targets for the Sensex and Nifty?
A: On the Nifty, 4,200 levels would be the target. From 5,900 onwards, we have been constantly talking of 4,200 levels. This view has been panning out across nine-ten months approximately. We have been holding very bearish stance. Now that the stance is playing out on the market, 4,200 is the level of investment. Q: Where do you see the rupee-dollar going technically?
A: The rupee dollar is in a state where it has become neutral. The rupee can appreciate by another Rs 2 and could weaken by another Rs 2. If we consider the weight of evidence, the rupee can ultimately head to Rs 54 levels, but we expect the rupee to face some serious selling pressure at this current point. Q: If your medium-term outlook is that the market finds some kind of support at 4,200 levels, what kind of new range has it set itself up for after having broken this 4,700 support?
A: The market is looking at the 4,700 support. When we recently retested that, there was significant volume because of expiry and other factors. If the Nifty breaks the 4,700 decisively, then the range is setting for the lower end, where we could have a scenario where we were trading between 4,200 and 4,700 levels for a fairly long time. Q: How would you approach some of the relative outperformers like IT, where Infosys has done better than many of its peers in the Nifty?
A: Infosys can correct to Rs 2,440 and I would continue to hold that stance. The bear minimum that Infosys will correct would be Rs 2,440. It could be a relative outperformer, but we will watch for this target first. Q: What is your call on ICICI Bank technically?
A: ICICI Bank has done something very differently, which was not expected by the market, but we were looking at it. ICICI has corrected very viciously and gone under its support of Rs 760 levels.
ICICI had broken very key critical supports. The support range now is between Rs 615-575 levels. We expect ICICI to land to the target of Rs 615 to Rs 575 levels. Q: In the infrastructure related space, what do the charts of BHEL and JP Associates look like?
A: Infrastructure is a decimated space because it has had not real pullback or rally. BHEL has been an absolutely disappointing stock, where all investments that have been made have lost money for the last past three years. The stock price has become half.
At this point, BHEL has some very significant support placed between Rs 230 and Rs 250. One needs to look at BHEL at this point. It could be an investment area, but one must not expect upsides in the immediate-term. It