Jai Bala of Cashthechaos.com believes Nifty will find support at 8140 in the extreme short term and if that gets broken, something around 7950 will be the next support.
Jai Bala of Cashthechaos.com says the trend is still up and investors need to be cautious during this phase of correction and need to tread cautiously. He advises investors not to get perturbed by the selling that is happening at the moment.
He believes Nifty will find support at 8140 in the extreme short term and if that gets broken, something around 7950 will be the next support.
Below is the verbatim transcript of Jai Bala's interview with CNBC-TV18's Menaka Doshi and Senthil Chengalvarayan.
Senthil: What do you make of the selling today and it is the index that seems to be really hurting?
A: What we hypothesized on the last day of the last calendar year was that the market is going to make a new high in this complex correction and then move down below 7950 that we saw in December. However, it turns out that it is not going to be the case. It looks like it is going to go straight below 7950 and then find a bottom somewhere close to 7700 or just about that place.
However, let us keep focus on the larger picture. The larger picture is still up, the trend is still up and you need to sail through this correction cautiously and not get overly perturbed by the selling that we are seeing at the moment.
Menaka: Are you saying 7950 will be broken or reached in this bout of selling or is that your anticipation through the course of January?
A: It is going to be through the course of January. It is going to be two steps down and one step up that kind of price action. It could be quick, corrections are really difficult to predict but it is a correction, it is not a change of trend and we have extreme short term supports at 8140 and once that is broken we are looking at something close to about 7950.
Menaka: We are seeing big cracks in some key stocks today, HDFC, ICICI Bank, Reliance has been weak all along and the crude connection makes it more susceptible. Same would apply to ONGC and Cairn. The biggest cracks have come in, in some fairly solid financial sector stocks?
A: Bank Nifty saw minimal correction in December. So, this is not unexpected. In fact when we spoke last week, I said Bank Nifty is looking strong but you need to be cautious. You need to put in money in Bank Nifty only once we see a correction. In fact Bank Nifty is seeing that complex correction that we had projected for the main index. It has made a new high but it is coming down from there. So, this is not unexpected but it will be looking a bit severe in the extreme short-term but there is nothing to panic.
Senthil: Given your experience in markets, would today's texture of the market give you an idea of who was selling today?
A: That will be a serious guess. It will border on the lines of gambling. I would rather not venture on that line.
Menaka: Just to pick up from the bank nifty point that you made, how much lower are you expecting? Would you at this point in time or have you continuously been short on the bank nifty over the last few weeks?
A: No. The major trend is up. We focus on trading the markets along with the major trend. Since the major trend is up we don’t advocate going short on Bank Nifty even though if you are nimble you could make money on the short side but that is not an ideal way for making money but it will work for some people.
Menaka: How much lower you are expecting the Bank Nifty to go from here?
A: If the Nifty were to go below 7950 which I anticipate I think Bank Nifty will go close to 17500 or slightly below that.
Senthil: Most fund managers we have been talking to think that financial shares are going to be the big outperformers again this year as well. So, what point would you start coming back into the bank nifty and its components?
A: I would be looking at 17500 ballpark as the ideal entry point or the ideal reentry point. I am bullish on the private sector. I would rate Axis Bank as the top pick along with Yes Bank. In the public sector it will be SBI but you need to see a sizeable correction something like 15 percent to come through. Once that is through I think the short term froth I would assume would have got liquidated and that would be an ideal entry point.
Menaka: One of the big triggers for why we are seeing this sell-off along with political uncertainty around Greece is what has gone on with crude oil prices in the last 24 hours. Do you track those levels closely? Do you have a view on how much lower they could be headed from hereon?
A: Crude - both Brent and Nymex - at this point, there is a very good chance of a bottom for Nymex around USD 48. If you look at Brent we are looking at something like USD 50-51 ballpark as a very strong support. However, it is a very strongly trending market and even then that will be a short to medium term rally for Brent. The longer term is much more dangerous and precarious. Both Brent and Nymex are looking like they would go below March 2009 lows. However, before that happens we are going to see huge sizeable spike come through for Brent and Nymex. So, we are looking at USD 48 as support for Nymex and about USD 50-51 as support for Brent.