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Last Updated : Jan 06, 2015 06:57 PM IST | Source: CNBC-TV18

Market fall unexpected; opportunity to enter: Experts

Kunal Saraogi CEO Equityrush was expecting a pullback for the market but not to the extent it fell. He thinks with the Nifty closing below 8,174 the market is definitely headed lower, maybe to the levels of 8000. So, one need not buy in a hurry.

Most market experts have been taken aback by the ferocity of fall seen in the Indian markets today. According to Sudarshan Sukhani of s2analystics.com the big slide in the market was unexpected and thinks that the market trend has turned decisively down.

The Sensex plunged 854.86 points or 3 percent at 26987.46 and the Nifty slumped 251.05 points or 3 percent at 8127.35. The Sensex and Nifty mark biggest absolute fall since October 24, 2008. The Sensex is below 27,000 for first time since December 18, 2014.

Kunal Sarogi CEO Equityrush was expecting a pullback for the market but not to the extent it fell. He thinks with the Nifty closing below 8,174 the market is definitely headed lower, mayve to the levels of 8000. So, one need not buy in a hurry.

Meanwhile, according to Ajay Bagga, OPC Asset Solutions and Devang Mehta, Anand Rathi Financial Services the correction  has given people opportunity to enter the market at lower levels.

According to him it is time to buy banking stocks, preferably private banks, autos, cement. He is also upbeat on IT and Pharma but no the industrials.

Mehta says instead of pondering on why the market has fallen, it is time start buying good quality stocks. He is bullish on banking, NBFCs, defensives like pharma, FMCG. Even IT could be added to ones portfolio, says Mehta.

Sukhani says, today's decline has changed the short and medium-term trend of the market and this according to him is not a mere bull market correction.

According to him this market must be sold into and the correct strategy would be start building PUT positions tomorrow, so in case there is a rally one can add to it.

transcript of Sukhani and Sarogi on next page



Below is the transcript of Sudarshan Sukhani and Kunal Sarogi's interview with Anuj Singhal, Senthil Chengalvarayan and Menaka Doshi.

Senthil: When we spoke to you in the beginning you said you would be looking very closely 8150, 8150 has cracked. What is the next level is it all the way down to 7950 or could we bounce back from here?

Sarogi: I was expecting for a pullback to happen but that hasn’t happen today and what worries me is that we are going to close below 8175. Now, that we are closing below 8175 the next port of call for the Nifty would be close to about 8000. So, I am expecting another 100 points on the Nifty on the way down. There will be margin calls also tomorrow because a lot of long positions especially retail long positions need to be unbound. So, overall markets are definitely headed lower, one should not be in a hurry to buy.

Senthil: The extent of the fall, how far can this take us, you have given us levels but in your opinion is this a short sharp correction or has the trend changed?

Sarogi: There is more in store. You could see a bit of pullback tomorrow in case Dow holds up and there is no more decline there. I think the markets might open with a gap up but what remains to be seen is that whether we are able to close above 8175 or even trade above that level, to my mind that is the most critical level for the Nifty. So, if it closes above 8175 tomorrow then for the time being the correction would get arrested otherwise we are definitely in for some more correction and 7950-8000, the level that is being talked about, I think that is the level we are headed.

Menaka: What would you buy in this market of falling prices?

Sarogi: I would be very reluctant to buy. However, the first stocks that I would buy would be banking stocks and I would buy them once they start to show some bit of real strength. However, I would wait and watch for now.

Menaka: Are there any good shorting opportunities that you see open up between the next week or so?

Sarogi: One could short high beta if you are slightly more risk taking. If you are slightly more risk averse even IT makes for very good shorting because the structure there has weakened quite significantly. So, I would say that one could short even Infosys and Wipro ahead of results; those are stocks that might come in for some bit of pressure going forward.

Anuj: Surprised by this move or do you think its par for course? In terms of the market trend now, how should one play this market?

Sukhani: I am very surprised by the move. Of course by the time we opened up in morning the DOW was suggesting that something like this could happen so I'm surprised when we closed yesterday since then. So, clearly it took me unawares but that's the market for you. The trend has changed decisively to the down. Now whether it's down or choppy, that the markets will tell us but I don't think it's choppy. It's probably much lower levels below 8000.

Senthil: When you say trends has changed, is it a short term trend or medium-term trend that has changed?

Sukhani: Today's big decline has changed both the trends together. It was stupendous and this is not a bull market fall. Sometimes bull market declines are arrested by the afternoon. We saw one just last week. This large range, a small gap and then a continuation, it is something much deeper. The markets will tell us that the first step is that you have trading positions still and you really shouldn't be having them. If you have them, then you must get out.

Anuj: But what about shorting the market? If you believe the trend has decisively changed, in that case, you can make money both ways. So at what point would you advise fresh shorts because today put option prices would have gone up dramatically. So, how would you approach shorting this market?

Sukhani: Although I did not, at some point in the day itself a short window opened up. Now the problem is this market should be sold into. The only problem is one of tactics. Do you sell after a 250 point decline or do you wait for a rally that may not come? The correct approach is to start building some put positions tomorrow. If there is a rally then you can add to it but the market has made lower highs, it's shown its inability to cross 8600, had a very deep fall today. It's not looking good.

For the full interview watch video

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First Published on Jan 6, 2015 04:49 pm