Yesterday's fall has 'cleansed' market for October: Analyst

The volatility witnessed in the market yesterday, after geopolitical concerns and worries of rising macro-economic instability, led to some "cleansing" in market sentiment and will help it start afresh in October, says Tushar Mahajan, Head of Listed Futures & Options - India, Nomura."The complacency that had set in has got out and we have started a new series on a healthier note with the open interest down to the lowest level in two-and-half months. The capacity to absorb negative surprised from set up perspective in October series is much better than,” he said.

For the October series, the upmove for the Nifty is capped at 8,800 and while the floor for a downmove is at 8,400, according to Mahajan.Below is the verbatim transcript of Tushar Mahajan’s interview to Anuj Singhal and Latha Venkatesh on CNBC-TV18.Anuj: What a treacherous end to the series yesterday for the markets of course. How are things shaping up for October series now?A: Whole bunch of things added to the volatility yesterday -- obviously, the surgical strikes around the line of control (LOC) and also the futures expiry. In some sense probably this kind of a cleansing from a market perspective was needed. I am not saying on military action but just the action in the markets because over the last three months, we have seen a continuous upmove in the market with very limited moves around these kind of magnitude.So, what yesterday along with the futures expiry achieved was we saw a fairly large amount of the open interest (OI) either getting expired or people unwinding a lot of the longs. So, the kind of complacency, which had set in that got out and we are starting the fresh series on a much healthier note from an overall set up perspective with open interest probably down to the lowest levels in about 2-2.5 months. It may still be high from an absolute base but relative to what we were seeing in the last 2-3 months. So, the capacity to absorb negative surprises now is from a set up perspective in the October series is definitely much better at this point in time than what it has been since July so far.Latha: What is the new range for the market, for the Nifty? What are the goal posts for October?A: Leaving aside the escalation on the Indo-Pak border, the key trigger right now which everyone is going to be looking at is the first monetary policy meeting coming up on the fourth. So, if the statements around that are dovish as a lot of people expect you could probably see a move up. Through the series of October, the upside will probably stay capped around the 8,800-8,850 levels, which will happen in case of a dovish kind of an outcome from the Reserve Bank of India (RBI) meeting. The downside looks fairly well protected around 8,400 levels. Status quo speaking my sense is if you are looking at a range, it is about 8,400-8,850 or so.Latha: So, from technical positioning of the market what may be the laggards and what may be the leaders in the Nifty?A: So, on the sectoral side with respect to how the rollovers happen, how the positions are based etc some of the sectors which have seen fairly healthy rollovers include consumers, they include private banks and they include some of the cement companies. On the lagging side, you will probably see IT kind of continuing to be a bit treacherous, pharma again not too very healthy with respect to the kind of rollovers that we saw there.