Sensex may fall to 22K pre-monsoon; like aviation: Expert

Q: What are the charts indicating for the Sensex now?

A: After 20 months of rallying from August 2013 onwards we have reached a stage where index should double top at 30,000 levels and the channel which was enclosing the rally of last 20 months is slightly breaking.

Now yet if you can see the lower line of the channel has not been broken conclusively because you don’t have lower top, lower bottom still below that channel and therefore, if you see that chart from May last year you always a had higher bottom.

Therefore, as long as it maintains higher bottoms you can have upside continuing. We have broken out of big five year triangle which commenced from 2008 and ended during 2013.

It is a five-legged pattern, the largest leg was down leg of 2008-09 which was around 13,000 points of Sensex in terms of fall and then you had smaller legs culminating into some kind of triangular moment. It is called an ascending triangle because it has got horizontal lines on the top and at the bottom after 2008 bottom there were higher bottoms and it broke this pattern during 2013.

Now, after breaking this there are certain pattern implication out of an ascending triangle. The largest leg of the triangle as I mentioned earlier was 13,000 points and this rally from August 2013 is also roundabout 12,500 to 13,000 points.

When you break out of a triangle technically it achieves equality with the largest leg of the triangle 25 percent plus or minus. So already having achieved an equality of 98 percent etc 125 percent will calculate to 33,000. So if we hold these levels and do not form a lower top lower bottom below the rising channel of last 20 months then we have positive hopes.

Q: What if we break the last low and make a new low?

A: A channel correction by NEoWave suggests some kind of a complex corrective. This kind of a complex correction has certain pattern implications. This channelled rally I consider as a triple combination and which has got pattern implication of 60-70 percent which will calculate to 22000 or 23000 of Sensex. This lower target is also very close to the highs of 2008-09.

Technically, when you break out of something you come and test those highs which were broken in 2013. So, another level which will be equivalent in Nifty would be 6700 to 7000 levels. So, this will be the downside target once the downside confirmations are in place.

Q: What kind of timeline would you attribute to that – 22000 on the Sensex?

A: I am saying if it happens within a month or so – during this month or next then the fall could be quite fast and we can have these targets being achieved somewhere before monsoon. Then rest of the year a rally will take place and it will go back again above 30000 levels. It is a trajectory which will continue in this fashion.

Within the trajectory you can have 20-30 percent fall and then recover back.

Q: What is the higher probability event?

A: Once you break it is roundabout 99 to 100 percent kind of a probability.

Q: What sectors are looking the strongest and the weakest to you right now?

A: Historically, 2008 highs was laid by property stocks and they had about 80-90 percent fall and that sector will take another one or two years to bottom out but this rally has been laid by mainly pharma and small cap stocks.

Now if Sensex can fall to 22,000-23,000 level which is 25-30 percent fall the broader market which is a small cap can fall up to 40 or 50 percent. Even pharma which lead this rally can fall more than Sensex which is evident from the last five days of action.

I am bullish on airline stocks because the major top was made in 1995 and it has already completed nine years and you can see Jet Airways or SpiceJet at every dip one can buy as a sector airline stocks.