See Nifty at 6200; bullish on rupee till 55/$: Barclays

The last few sessions have been quite rangebound and Dhiren Sarin of Barclays believes the market at the moment is consolidating for more above the 6,000 level on Nifty. Therefore, that remains the first hurdle for the market to cross. Once that level is breached convincingly, he expects the NSE benchmark to move to 6,200.

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Sarin further clarified that they maintain a medium-term bullish outlook keeping in mind the market technicals now. "In technicals, it is all about the risk more so than the reward and we are trying to limit that risk. So 5,775 is the initial support and then 5,515 or anywhere in that zone we would expect buying interest. If the market does get through that level and that area, then we will have to reassess the medium-term bullish outlook," he clarified.

Moreover, both the Sensex and Nifty have been in a seasonal bullish phase in December in the last eight out of nine years and therefore, in keeping with that trend Sarin feels there could be some buying interest towards the end of the year.

The S&P 500 too has a strong support at 1365, he added. With a bullish outlook on financials he believes the space is going to outperform from hereon. He is also positive on the rupee if it holds the 55 per dollar level.

Here is the edited transcript of the interview on CNBC-TV18.

Q: We have been quite rangebound these last few days, what are the technicals pointing to on the Nifty?

A: On the Nifty itself, we are noticing that the market is waiting a bit here. Ultimately, that is healthy because if the preceding trend is higher, the market is almost acclimatizing at these higher levels and setting up for another push higher still. Last time our targets were around 6,000 and we are very close to that. That remains an important hurdle to overcome. Once we get through 6,000, we can start looking towards 6,200.

Q: If you were a long trader, where would you keep a stop loss right now on the Nifty below which you will start getting worried about the uptrend?

A: In technicals, it is all about the risk more so than the reward and we are trying to limit that risk. So 5,775 is the initial support and then 5,515 or anywhere in that zone we would expect buying interest. If the market does get through that level and that area, then we will have to reassess the medium-term bullish outlook.

Do keep in mind that this is a seasonal bullish period for the Nifty and Sensex, eight out of the last nine years in December have been bullish for the Sensex. In line with that, it is another reason why we think that there should be buying interest into the year-end.

Q: Where are the supports on the S&P 500 now after looking at the ranging action of the last few days?

A: Yes, the S&P is being dragged down at this point by the Nasdaq in particular. Technology stocks are not doing as well. So we think that the S&P has room for a little bit more weakness but, not catastrophic by any means. It has a good support zone around 1,365-1,385, which is the 200-day average.

Initially, we would look for a bounce from there. If that starts to break, we would have to reassess and assume a deeper pullback but, it does seem that US equities are becoming a relative underperformer here in the global scale.

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Q: The years in which the Sensex and Nifty struggled were also the years where there was quite a bit of depreciation on the rupee, how much of this has tied in with the currency move and what kind of targets do you have on the rupee now?

A: We believe optimism is one whether it is through equities or forex, bonds. They are definitely tight together, in fact, even more so with some of the emerging markets in Asia. If you look at the Kospi and Korean Won, they move quite in line with each other, similar to the Sensex, Nifty and the INR.

At this point we are near-term bullish for INR, not massively so but, we do think as long as it stays below 55-55.30, this market is a sell on rallies and dollar-INR can push back down towards 54-54.20 area, which is the more important support area to be monitored at this point.

Q: At this point, any specific names that stand out on the index that might help it get to that 6,000-6,200 zone?

A: I do not have any specific names here but, I do think that the banking index is doing quite well. We are only about 6 to 7 percent of its all time high and if you look at the banking index, the Nifty Bank versus the Nifty index itself, there is some sense of outperformance. This is a phenomenon not just in the east but, also in the west.

We are seeing this in the US where the US banking sector is doing well despite the technology not doing so well. We are hoping that the banking names can pick up some of the slack here.

Q: The standout market over the last few days contrary to what the rest of the year has been like has been the Shanghai Composite, do you see China bouncing back smartly, do the technicals look good?

A: There was a rather spectacular move on Friday for the Shanghai Composite, 4 percent and some more. We think these were quite significant moves. We have been medium-term bearish throughout this year, this is one of the top bearish trades at the beginning of this year and what we are seeing towards the end of this year is quite encouraging.

We saw a pretty strong move higher and what this has done is it has turned the trend of the last twenty months which has been downward. So ultimately we think Shanghai Composite now is setting up for 10 to 15 percent move higher. This is indeed the bigger story in play.