Sushil Kedia, director - Quantitative Strategy, CIMB believes the Nifty may see a rebound, although a small one, on Wednesday.
Speaking to CNBC-TV18’s Sonia Shenoy and Latha Venkatesh, Kedia says Oil and Natural Gas Corporation (ONGC) is a stock he is eyeing right now. He expects a 10 percent rebound in the stock today.
Also read: Why JM Fin, Macquarie differ on Nifty's next move
Furthermore, Kedia says if the Nifty rebounds 200-250 points then one should open short positions and play it to 5500.
Below is the edited transcript of the interview to CNBC-TV18.
Sonia: What is the sense you are getting about the downside for the Nifty now that it has breached the 200 DMA?
A: I strongly dismiss the 200 daily moving average (DMA). It is too popular with neophytes in the game. If you cannot answer the question why the 200 DMA is better than a 201 or a 199, then you have a classical mathematical problem of infinite degrees of freedom and such indicators are at best to be taken as a trigger point for the less smart in the market to throw in their towels.
I do not look at the 200 DMA. Ofcourse I look at other things. So, for a very short-term trading, tomorrow is the day for a potential rebound in Nifty to come. For today, I am closely watching Oil and Natural Gas Corporation (ONGC) for a 10 percent rebound.
A number of other stocks will perhaps give that confirmation for tomorrow, but the coming rebound is only going to be small. My medium-term outlook remains the same and I think over the next 3-4 months, most of us will get very surprised at the extreme damage that is going to come very rapidly.
Latha: What kind of a rebound are you expecting tomorrow and what kind of damage more importantly?
A: I have had been saying that 4500 is possible. Whether it goes to 5000-4900 we will have to cut it finer there, but that number is on a 3-4 year timeframe. I am also looking at Nifty to go past perhaps 13000-14000 and for somebody looking to capture that over a 3-4 year timeframe has to be mentally ready to be able to withstand a loss of close to 1300-1400 points from now.
The room for downside until the new government comes to power is till the middle of this year. I am not making a forecast and sticking my neck out on it, but a highly probable scenario exists that such a downside can come and we will have to keep on playing it in pieces.
One of the smaller pieces for now is that we ride a 400-450 kind of a loss on Nifty. Perhaps if tomorrow intraday signals confirm it maybe time to close shorts. 200-250 points rebound comes maybe again there you open shorts and you play it down to 5500, so we will have to see that.
Latha: What are the better shorting opportunities at this point in time?
A: Nothing. With this much downside, the Nifty might make a trading bottom tomorrow. So, as of now with so much slide try and lock in your profits if there is a confirmation signal that comes in tomorrow maybe with Nifty.
Along with Nifty, there maybe a small 10 or 12 percent rebound coming in DLF, IRB or even in a Power Grid or Reliance Industries. SBI too might start making a bottom process. So, I think there has been a decent fall. Give it sometime. There will be a small rebound that can play out for 5-8 days and then, once upon a rebound, I will definitely be looking to short almost everything. There is a caveat though, if after tomorrow's adventure, if I still find that day after tomorrow's closing is lower than today's low, I will again get humble and surrender and join the immediate extended weakness.
Tomorrow is a fulcrum for me, not today and in case that is broken day after I will get humble and surrender and join the trend again.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
