6000 major cap for Nifty; gold to see sub-$1300: Darashaw

Regan Homavazir, associate VP-Technical Research, Darashaw sees 6,000 as a key resistance for the Nifty going forward.

“The Nifty is going to head towards 6,000 only on a short squeeze, so at that level, lot of people would want to book profits because it will be a physiological barrier for the Nifty. Should we sustain 6,000, then Nifty will try and confirm that it will not go below much,” he says in an interview to CNBC-TV18. Also Read: Here's what to expect from HDFC Bank Q4 earnings Bank Nifty's performance will be the key trigger for Nifty heading upwards. "The Bank Nifty is now at a place wherein if it is going to absorb this selling, we are going to see some fairly significant moves in the banking space, particularly with HDFC, HDFC Bank and ICICI Bank,” he adds. Meanwhile, he believes that the current pullback seen in gold price is not sustainable and the yellow metal is likely to fall further. "The breakdown seen in gold is very conclusive and the rally that we are seeing currently is only a relief rally and is likely to go lower. We can go below USD 1286 and even reach a USD 1000 per ounce," he adds. Below is the verbatim transcript of Regan Homavazir’s interview on CNBC-TV18 Q: There has been some momentum on the screen in the last couple of days, but the big question is whether it is looking like a big push for the Nifty – technically, what do you see? A: It is very important to notice the way global markets are positioned. When we look at America in particular, the Dow Jones suggests that it is going to trend even more. Since 2000, Dow Jones has made a high of about 11,900. Till date, the Dow has literally done nothing because today we stand at 14,500. The seventeen year cycle that people speak about is negated and Dow is now likely to do something more bullish than it has ever done. All this under performance from 2,000 is likely to eliminate itself. So, we are restricting ourselves for an initial target of 16,500 on the Dow on the upside whereas downside has absolutely limited to about 13,500. Looking at the Nasdaq and the S&P, the S&P is positioned likewise. It looks like it is going to maintain the 1500 mark and embark on a rally till about 1900. Nasdaq on the other hand, is a bit of a contrary because it is positioned at a supply point and we expect it to come to 3,000. When one looks at Europe, in Europe the FTSE, DAX and the CAC are the three major indices. We expect the FTSE and the DAX to continue on its upward trend whereas the CAC is looking more or less neutral. The FTSE and the DAX have resistances 3 percent higher. However, as soon as they absorb that selling pressure we are expecting that to move up another 20 percent. The Nifty is positioned. It is more neutral currently, although it is placed at a resistance area of 5830. We are expecting the Nifty to not go down too much. We are expecting the test to 6,000, should that get overhaul, then we are talking of higher numbers but 6,000 is actually the key resistance. Since the Nifty has moved up in five day straight a pullback to 5660 cannot be ruled out, however, we are looking at the internals positioning better for the Nifty. Q: Until now, there have been fairly disparate moves between the Dow and the S&P versus Indian market. Are you now saying that we are entering a patch where global markets will move in the same direction and that direction is up? A: Yes. _PAGEBREAK_ Q: What would be the primary motivating force for the Nifty? There has been some strength in the banks- would that be the space you are watching and what kind of targets would you have on the bank Nifty? A: The Bank Nifty has been moving nicely. The momentum in the Nifty is because of the Bank Nifty. The Bank Nifty is now at a place wherein if it is going to absorb this selling, we are going to see some fairly significant moves in the banking space, particularly with HDFC, HDFC Bank and ICICI Bank. That is where the major momentum is likely to unfold. We are at a supply point. We need to assess whether this supply is getting absorbed. 2 percent higher on the Bankex, things will look very different. Q: If the market does manage to get to that 6,000 zone, would you treat that as an opportunity to start booking profits because it would have been a fairly big run for the markets in a short period of time? Or do you think breaching 6,000 is a very important technical development for the Nifty? A: The technical development for the Nifty is quite significant if we are at 6,000, because the Nifty was at 5500 at about five sessions ago. So, 6,000 will rattle the shorts. The Nifty is going to head to 6,000 only on a short squeeze, so at 6,000, a lot of people would want to book profits because it will be a physiological barrier for the Nifty. Should we sustain that 6,000, then Nifty will try and confirm that it will not go below much. Q: What have you made of the crash we have seen in gold and crude? What could that crash be pointing to in terms of levels that they could be heading towards? A: Late December, we had mentioned that gold is conclusively bearish and USD 1550 per ounce is the accelerating point for us with a target of USD 1286. With gold coming close by 2 percent to the target, we assume the target is met. However, the breakdown on gold is very conclusive and the rally that we are seeing currently is only a relief rally and is likely to go lower. We can go below USD 1286 and even reach a USD 1000 per ounce that being our secondary target. Q: If European and American markets are headed higher, do you see a similar chart set up for Asian markets because that has been a point of concern, the kind of breakdown we have seen again on the Shanghai composite, the Hang Seng is fairly volatile right now? A: Yes. The Hang Seng seems to be in a support range of 20,000-22,000 and is therefore, not a worry. Shanghai we don’t really track because the data is not really accurate so we are not looking at Shanghai that closely but Hang Seng looks fine. Since gold and light crude have fallen so sharply, light crude, we expect to come to USD 79. The steepness in the fall is making India look in a very sweet spot because today you are talking about gold coming down, you are talking about crude coming down, you are talking about inflation being at a multi-month low which is now pressuring for a rate cut. India is in a sweet spot. This rally in the Nifty could continue. Q: The strength in banking has been more than offset by this complete collapse on technology – a space that has been the leader for many months now. What do you see on the IT Index and some of the key players there, because that has an impact on the Nifty as well? A: The IT has been a surprise. Infosys falling by a near 21 percent has surprised the market which is why the collapse has been so vicious. At Rs 2,250, where Infosys stands what do you expect? We expect Infosys to bottom out. The downside is another 5 to 8 percent on the Infosys chart but it suggest that investments be made in the stock. When one looks at the Wipro chart, it is not looking that bad. Wipro’s major supports are placed at Rs 335 so we expect those supports to hold. Infosys, Wipro if one takes it together and TCS accounted for there is not too much downside. HCL is already out of the picture. We had earlier spoken of HCL being a sell and a switch on to Wipro. So, Wipro is something that we would like to stick with.