Bearish trends on Nifty; mid-term target stays 4500: CIMB

Sushil Kedia, Director- Quantitative Strategy at CIMB feels that the Nifty is increasingly getting bearish. He says that in the near-term support for the index is under 5,500. A rebound from here to 5750-5800 levels is possible, he tells CNBC-TV18 in an interview.

However, he continues to maintain his medium-term target of 4,500 on the index. Global markets will see a dramatic correction and he expects gloom in the next one-and-a-half years, Kedia adds. Also read: Earnings downgrade likely post Q2; bullish on IT: HDFC Sec Below is the edited transcript of his interview to CNBC-TV18. Q: You have been of a bearish bent of mind for a while. Purely for the immediate term, when would you advise taking a fresh short position on the index? What is the next level to watch below 5,750? A: Monday morning, it opened a gap down and we have come under 5830 on the Futures. People will talk about the Nifty cracking under head and shoulders. I am not sure if it is, but it is increasingly getting bearish. If recoil happens closer to 5880, it makes sense there to increase your shorts. If from the current movement Nifty goes below 5800, then maybe you add on to more shorts just pyramiding your profits. The markets will keep on oscillating up and down. But, from here, the next realistic level of support is slightly under 5500 from where a rebound back to 5800 may be possible or may be 5750. But, eventually I continue to look at 4500. Q: So how would the Bank Nifty move, do you expect it to underperform the Nifty? Last time you said it may not underperform the Nifty on the contrary. A: Yes. Purely, in terms of outperformance-underperformance, the Bank Nifty will be an outperformer. Such kinds of computations are more meaningful for long-only large portfolio manager who cannot hold more than a certain amount of cash. Banks have already been punished a lot more. The news flow will always trail what is coming into the future. Perhaps, this sounds counterintuitive. But they have already fallen so much and a ratio chart of CNX Bank to the Nifty index has a lot of indications by which during this fall to 4500, the rallies in banks will be much bigger than the rest of the market. Eventually the lower lows that Bank Nifty will also fall are not going to be as much damaging as the other stocks or Nifty. Q: If you had to give us some heavyweight stocks that will lead the market on the downside, what tops your list? A: Of the top 10 stocks HDFC, HDFC Bank, ICICI Bank and State Bank of India (SBI) are four financials in their order of market cap that will not fall as much as the others, which are Infosys, Tata Consultancy Services (TCS), Reliance Industries, Oil and Natural Gas Corporation (ONGC), ITC and Hindustan Unilever. Even Bharti Airtel, though not in the top 10 list has a much deeper fall. It is a game much more for long only fund managers. For traders for a very short-term, I am not looking to short sell DLF. I am not even going to short sell Jaiprakash Associates, Jindal Steel and Power Limited (JSPL). These are the only three places for the next 10-15 days where there may be few more sells still left for someone who is a diehard bull and has to find a bullish trade. There is no confirmation yet on all these three names. May be, in the next couple of days, there will be a small buy trade in them and DLF subject all to confirmation after two-three days may swing up by 30 percent. But these are smaller stocks in the Nifty, the broad trend not just in India. I am right now watching every key market in the world and I am readying for a massive gloom to come ahead over the next one and half years.