Nifty closing above 5865 today will be positive: Manghnani

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

Below is a verbatim transcript: Q: How is it looking this pullback and does it look like it is good for more on the index? A: It is a very crucial level. Yes, we have closed above the 20-day and the 100-day moving average, which is well documented. We are right in a trendline and so in a falling trendline if you connect 6,111 top and 5,971 top, it comes to about 5,878, which we reached yesterday in trade and today that line drops to about 5,865. So, if we close above 5,865 that is a good positive even on a weekly basis. Then it opens up the next target of 5,942, which is the 61.8 percent retracement of the entire move from the high to 5,663. There is a gap which was created around 5,942 a couple of weeks back. So, that gap also could be filled up if we close above 5,865 today. Q: The rise in global markets, the US particularly has been quite relentless, any point on the charts which is indicating that this might be the last gasp or do you expect those markets to remain supportive? A: It is a tough one. Obviously overbought, so at any point you could get a correction. However, if you are asking me if it is a short or is it suggesting a short right now, apparently not. There is no indicator as such that says, just go out and sell this market. Normally, you would require one major fall then a pullback and a lower top then you could decisively say that that market has topped out. So that is far from happening. It is still making new highs. As of now, I will be a little skeptical going long but yes, I do not have any indicators to go short. The one I think will top out very soon is the Nikkei. That has had too much of a run right now. It is trading right now somewhere around 12,200. I also feel the yen --although long-term may depreciate to 105, which is what is fueling the Japanese market -- for now will take a pause, maybe slowly inch back towards 86 and then make its move towards 105. So, in that what will happen is the Japanese market - because run from 8,000 to 12,000 - will probably give you a nice, proper 50 percent correction as it is coming out of a major bear market. So, it cannot just take out all levels and run through. It is going to give you a pullback at some point. Yes, it does not look plausible right now and that is possibly what happened, everybody gets bullish, something does not look like it is going to go down but it will happen at some point. Very similar to Shanghai which is already in that corrective mode. It had a fantastic 500 point rally but now you are seeing the early signs of volatility. So that also has started its correction so maybe only the US right now I do not have to believe the technical indicator to go short but the Japanese market and the Shanghai market will correct very soon. Q: You have got a short on Hindalco Industries there? A: Even if the market were not to go back and retest 5,660, which normally in such a brutal fall in stocks you would expect, I still expect a lot of the beaten down stocks after this short covering rally or oversold rally -- irrespective of what the market does -- should go back and retest their lows. Metals has been the weakest sector. So if you get a pullback closer to Rs 105 and right up to Rs 110, that zone is a short for me with Rs 111 as a stop loss. It should go back and retest the recent lows of Rs 94. Q: You are also short on a stock like Sterlite Industries today? A: The overall sector is weak so more stocks should go and retest their recent lows. So, Rs 102-106 is the shorting zone with Rs 107 as a stop and it should go back to Rs 90 which was the recent low. Q: What do you think, any suggestion of a major trend in the market or is it still a buy 5,700, sell 6,100 kind of outlook going forward? A: I guess the key call is, is 6,100 the top? I am not sure yet. I will need some more evidence. Even if I say that 6,100 may not be the top, I do not see us taking out the new high this year. So, maybe we are capped at 6,300 for this year and the real rally starts somewhere in 2014 mid and then continues all the way to 2015 and 2016 January. That is what is going to be the bulk of the new rally. So, maybe we are still in that five-year consolidation phase that we have been since the 2009 bottom because a classic bull market is taking out the previous high, which it has not done yet.