Nifty's downside capped at 5500-5600: Anil Manghnani

In an interview to CNBC-TV18, Anil Manghnani of Modern Shares & Stock Brokers, spoke about his reading of the market and his outlook.

Below is a verbatim transcript:

Q: How is it looking after this week's crunching blow? How are you approaching the Nifty and what kind of targets are you keeping?

A: I guess it is the last piece of the puzzle. You had the midcap and smallcap index break their February end or March first week lows and then you had the Bankex also take out its recent low at 11,400. So, it is no surprise.

The last bit was the Nifty to break that 5,663, which has happened. Now that all four have made a new low, I would look for some sort of confirmation.

I mentioned last week that if it took out 5,780 then 5,663 should be taken out. There are so many people holding onto the fact that it has made a higher bottom, so that is a crucial level.

However, now having broken that level, even that side of the market will give up and that is when you need a proper rally when most of the bulls give up. You are going to reach that stage pretty quickly.

My gut feeling is still 5,600-5,500 is the floor or the trading bottom for this fall. Whether it goes below in the next fall is irrelevant to me right now. Right now, I am looking at that level to hold for sometime and maybe a steady pullback and then we can take the next call whether 6,100 is the top or we will take that out. That all comes later.

For now, I am working with the pretence that 5,600-5,500 will hold and may start a mini rally back to 5,800-5,850 kind of range.

Q: What is the problem with the Anil Dhirubhai Ambani Group (ADAG) stocks technically, many of them are already trading at 52-week lows but do you see much more pressure for them?

A: This has been the phenomenon with most stocks. As soon as they took out their February or March first week lows, they have got hammered even further and quite substantially. If you take Reliance Infrastructure, it was about Rs 412 the last time we were at 5,663 but today it is around Rs 330-340 mark. I went back and checked. I think the last four-five bottoms be it 2004-2008-2011-2012, it has always stopped at this Rs 330-340. So, hopefully it stops here because the last time it touched Rs 328 low was somewhere in 2004 if I am not mistaken. So, if it starts to take out that level, that could be some problem for that stock.

Reliance Communications (RCOM) is well documented because this stock was at Rs 140 when the Sensex was 8,000. So that stock has steadily made new life low. So, I am not sure what is happening there and where the bottom is for RCOM.

Q: From this blue-chip basket, you are going to stick with something like Hindustan Unilever Ltd (HUL)?

A: I thought if I give some more shorts at this point, it is very difficult because if the market does bounce at any point, it is going to be one of those whipsaw moves where if you are short, it could take you out even though, I know many of the stocks are weak. So, I went for little safer names right now. Stocks that have probably already done their move on the downside - Hindustan Unilever Ltd for that matter around Rs 440-450 mark has spend some time and now is slowly inching up. So, while the market is so nervous, some of these stocks may be safe hiding stocks. So, maybe with a stop loss of Rs 450, it probably has some upside left in this move right up to Rs 489.

Q: You have also got a trading call on Wipro today?

A: Yes, it is one of the safe ones. Post the results, the stock crashed and the way it bounced back is quite commendable. So, maybe some of the shorts have also got squeezed out over there but it is a run to safety again. Maybe not at Rs 435 but if it dips closer to Rs 425 then your stop is well defined just below the 50-day moving average (DMA) at Rs 417. This stock has the potential to go back and retest its recent high of Rs 456 and maybe even higher to Rs 475. Again it is one of those defensive stocks given the volatility and the nervousness in the market.