The Nifty has traced out an impressive long-term uptrend and could even reach the 11,500 level, said Laurence Balanco, Global Technical Analyst at brokerage firm CLSA.Speaking to CNBC-TV18, Balanco said this breakout would be driven by the Nifty Bank. He did not give a timeline for the record highs but said the bull run would continue at least till July and said that CLSA had set a target of 10,350 for the index once new highs are achieved.On February 23, the Nifty hit a fresh 52-week high of 8970.05 for the first time since September 2016, and closed just short of the 8,900 mark on Friday. It last crossed the 9,000 mark in March 2015. Balanco said the markets would pause in the coming weeks but it would only be a short-term hesitation and the broader uptrend should remain as price action is on the cusp of breaking out.He said that December lows will be held and as long they do, the positive trend will continue.Below is the verbatim transcript of Laurence Balanco's interview to Latha Venkatesh & Sonia Shenoy.Sonia: I wanted your view on what the near term could look like for the Indian market considering that we have hit a new 52 week high but around these levels of 8,900 to 9,000, we have seen a lot of resistance in the past as well?A: We have seen the market now moving towards resistance provided by 2015 and 2016 highs that we saw in September and March respectively - that plus the momentum indicators that we are looking on daily basis overbought and if we put that into perspective to what the global scenario that we have seen, some accelerated gains is that in a very short-term we will see the market pause and hesitate at this point but it's only a short-term hesitation rather than a major reversal. So the broader uptrend that we have see unfold over December lows, should remain intact for the Nifty.Latha: Therefore, what would you look at as contours now and if you were to draw the Nifty chart over the next six months, where is it headed?A: We believe that this 9,000 area, we will break through that to make all time new high and we have got an upside target initially at 10,300 but that do stretch up to 12,000 but 10,300 being our first upside objective. Latha: That is the target for 2017? A: Essentially we should see at least 11,500 but we don't base our projections on time based services end of year objective. Once we break through levels and extended the uptrend - those will be the next three target levels that we will be focusing on. Sonia: The December lows will be held you think? A: Yes, I do think they will be held. That is a critical support level for the uptrend that is developing in the Nifty market. So as long as that remains intact, we would look for those target levels that I mentioned earlier.Sonia: To get to the level of 11,000 that you have been talking about on the Nifty, what kind of support are we getting, from which quarters. Reliance Industries has started to perform really well. It is already up 16 percent this year. Do you see support coming in from there or do you think the banks could do most of the heavy lifting?
A: For us, when we have seen the Indian market breakout, the key sector having sustained breaks on the broader index level has been the banks. So we are highlighting this - the Nifty bank index is a key driver to sustained break to the 2015 and 2016 highs. If you look at broader index, you are testing that area in the short-term, so look for some short-term volatility around this resistance zone, but ultimately we think we break through that point and head up to 32,000 area on the Nifty bank index.
Latha: Have you looked at the metal charts, the base metal charts and the crude charts. What are they telling you for the ten months of 2017 that are left?
A: At the spot level for those commodities, obviously crude is still holding in a very tight range between essentially USD 52-55 per bbl but as long as you remain above USD 52 per bbl, you can still get benefit of doubts to last year's breakout. So USD 52 per bbl is quite keen on that.
The base metal is a bit more of a mixed bag. So we have seen quite a bit of dispersion as far as performance goes. We had early breakout recently. We have got copper still in the trading range around 270-240 area. So it is a far more of a mixed picture within the broader base metals and that will continue through the rest of the year that will be quite selective and rotational within the commodity basket.
Sonia: So a follow-up to that - is there more scope in the metal stocks in our market because last year was a great year for metal companies and this year there seems to be some follow-on buying with most of the stocks like Tata Steel up about 25 percent?
A: That's the sector I will be taking profits in and a number of indicators are showing that - typically in steel, iron ore and coal side is that the momentum indicators are lagging behind price action and that's typically a sign that the uptrend is maturing. So, I would essentially look at taking profits on the metal side and I do not think they will be key drivers driving the Nifty to new highs. So I will be taking profits on the metal and mining stocks.
Latha: Would you have a view on the dollar index, a view on dollar rupee for the next couple of quarters?
A: We got to be quite careful because the dollar index is only six currencies that you are looking at, a product versus US dollar. So if we look purely at the price action of those six indices represented by the Dollar Index (DXY), you had a breakout in 2016 when we pursued 99-100 resistance area - that breakout is still intact, giving us an upside target of 106. So against those six currencies I expect further US dollar strength but if you then start to look at the rupee for example, if you look at another currency, you have got quite a stable picture. So the dollar strength is selective - that's the message that the price action is telling us
However, I do not see any significant rupee weakness here and the trading range remains intact. But if you are asking purely on the dollar index - the dollar uptrend is intact and I expect further dollar gains.
Sonia: How the year could shapeup for developed markets versus emerging markets because so far both are performing in quite a decent fashion with both US market as well as India sitting at 52 week high. Where do you think the outperformance could come from?
A: The current scenario is that we have seen a high momentum uptrend across a number of global markets; the markets that are in unison. As this trend continues, we will see the market narrowing into certain themes. So we will all start to lose some of the weaker markets as a trend resumes. So the trend that we have currently got should continue into June-July before we will see weakness and some of the weaker markets starting to rollover. So as we go into the middle part of the year, these current uptrends that we have, do continue into that period.(Disclosure: Network 18, which publishes moneycontrol.com, is a part of the Reliance Group.)
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