Start buying if Nifty slips to 5600: Anil Manghnani

Technical analyst, Anil Manghnani of Modern Shares & Stock Brokers shared his outlook on market and specific stocks.

Below is the verbatim transcript of Manghnani's interview with CNBC-TV18. Q: You were expecting a thrust on the way up. Has the price action  disappointed you? A: The break of 5,780 was the key yesterday because the intraday trade after the Dravida Munnetra Kazhagam (DMK) news came out and we broke that, we tried many attempts back to 5,775 but we were not able to take that 5,780 out again. However, that was disappointing. Maybe that will be the first hurdle to get back above 5,780 crucial supports. I think two things are very clear. One is whether the market comes back to 5,663 is irrelevant. The midcap and the smallcap needed a retest or at least a new low given how weak they were. So, no surprise to see that the CNX smallcap is only about 20-25 points away from its February end or March first low and even the CNX midcap index is about a percent away. Second, the other phenomenon one has seen in the past, when the market makes a low and bounces back, when it does a retest or even comes back close to it, one see many stocks break that previous lows. Nifty won't move beyond 5850 in March series: ICICI Direct Therefore, if one look at 5,663 bottom and look at today, there are so many largecap names that have broken that 5,663 bottom lows. Look at ACC, Bharat Heavy Electricals (BHEL), JSW Steel, Yes Bank, Hindalco Industries. I am not talking about midcaps and smallcaps; I am talking about largecaps, Reliance Infrastructure for that matter. So, there are so many largecap names that have broken their February end, March first week low, which suggests that a lot of pain was left in the system and that had to be completely removed. So, I think hopefully, even if 5,663 were to be taken out, I do not see too much downside in this series. I think maybe 5,600 is a buying start. That was the original level we had talked about in February that when the market was correcting, 5,500-5,600 that should be a floor. However, that floor still is in place. Therefore, if it comes to 5,600 or so, one could still be a buyer but one can see stocks still feeling the pain. _PAGEBREAK_ Q: You are selling Bharat Heavy Electricals (BHEL)? A: I had mentioned three-four months back on this stock that Rs 195 has held out for the last five years. This is the 2008-09 low. Therefore, when the Sensex was 8,000 the stock was at Rs 195. Today, Sensex is at 19,000-20,000 levels and the stock is still breaking those lows. I think the only encouraging sign, the only exciting part is that at least yesterday’s breakdown was on lower volumes. Therefore, I feel that now it has broken through Rs 195, the key support. It opens up a downside of Rs 175 to Rs 166. I guess the stop would be that Rs 195 level, which it broke down below. Q: Would you want to take a positional call on the market at this point in terms of how you think the series may end up for us? A: It is a tough one. If one looks at the data, the larger part of the volume has been in the Options side of the market rather than the Futures or even in the cash market. Therefore, that is when the market is so volatile. If we take out yesterday’s move, the last three-four days also have been whipsawing quite a bit intraday. If one is long, it cuts down and if it is short, it cuts on the upside. So, there has been a lot of whipsaw in the market. Therefore, probably, one can look at two ways to look at this. The volatility may help in making a trading bottom. If it is below 5,663, at least it would help in making a trading bottom because when one get excess volatility, it kills everybody, everybody gets out and then the market stabilises. So, I think that’s a good thing. When it will settle is anybody’s guess. However, I feel if it were to come closer to 5,600 again, I would not mind taking a punt. I mentioned it even last week that if one is taking a punt on a breakout, it is very early and there is no confirmation. So, even this would be without a confirmation. Hence, volatility might actually help in steadying the market for the April-May series. So, it would be a tough call. Therefore, to answer your question, 5,600 if were to come, Call options might be the better way to go because especially in volatility one tend to make more money when the Options because of the way they move -- they are swinging 50-100 percent a day and the volumes I think like in the 5,600, 5,700 and 5,800 Put options were in crore of shares yesterday in trade. So, I think that maybe the safer way to go. It is also explained how stocks are still making new lows for the year, even the largecap names so one do not know where they are going to stop. Therefore, the Option market maybe more prudent right now.