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Last Updated : Nov 15, 2012 01:14 PM IST | Source: CNBC-TV18

See good chance of Nifty breaching 5583 today: Jai Bala

Chief market technician Jai Bala of Cashthechaos.com sees a good chance of the Nifty breaching October 31 low of 5,583 levels today. The market may not be able to test new highs, if it drifts below that level, he cautioned.


Chief market technician Jai Bala of Cashthechaos.com sees a good chance of the Nifty breaching October 31 low of 5,583 levels today. The market may not be able to test new highs, if it drifts below that level, he cautioned.


Indices like Nasdaq, S&P 500 and Dow Jones are declining, but the volatility index (VIX) is heading higher, which indicates that complacency in the market is quite high. The market is looking for dark cloud, but what they are going to get is a tsunami, he said in an interview to CNBC-TV18.


The start of Samavat 2069 was weak for the Indian equity benchmarks on Mahurat session on Tuesday. The Sensex fell 51.47 points to close at 18,618, while the Nifty declined 16.75 points to 5,666 levels.


Also read: Not good day for bulls; don't take long positions: Sukhani


However, Bala still expects the Nifty to see a new high above 5,800. "At the same time, if the market was to drop below 5,500 then it may have already toped at 5,815, he added.


Below is the edited transcript of his interview to CNBC-TV18.


Q: We have been finding it tough to get our head above 5,700 levels. How would you approach today?


A: I do not trade in such a short timeframe. I take a bigger picture. I have been saying for the last few weeks that I have not eliminated the possibility of the market heading to new high, above 5,800. At the same time, if the markets were to drop below 5,500, the market may have already toped at 5,815. Today is going to be an important day, as there is a possibility that the market might breach the 5,583 low, it made on October 31. If the market were to do that, I would be in a position to eliminate the possibility of the markets going high.


I will be very watchful as to what the market is going to do today. If you look at the market from a global perspective, the Nasdaq is already down 11 percent from the highs. The S&P and the Dow Jones are down 8 percent, but the VIX index is creeping much lower. So, the market is saying is that the crowd is not extrapolating this down move as a start of a bigger trend. Thus, the complacency in the market is quite high. The market is looking for dark cloud, but what they are going to get is a tsunami.


Q: What are your thoughts on liquor stocks like United Spirits, Radico Khaitan?


A: I was quite bullish on UB Holdings, when it was trading at Rs 90. I had said that it will test Rs 110 and pullback one more time closer to Rs 90. It did exactly that. The UB Holdings is going to much bigger levels like Rs 240, in the medium to long-term. So, one can even place a stop of Rs 105-104 on UB Holdings and then a medium-term view.


 One can expect stock to do exceptionally well. For United Spirits, the momentum indicators and the technical structure is saying that it is just seeing a part of up move. One will see pullback in the extreme short-term. But, new highs are coming for that stock too.


Q: The rupee has seen quite a bit of weakness off-late, it's been hovering around 55 or so. You have a call on that one. What would you do with it?


A: I am very bullish on dollar cross rates. Most of the dollar cross rates is going to strengthen a lot. If one looks at the rupee, particularly from a very long-term perspective, the rupee in 1973 was trading at about 7 to the dollar and it pulled up to 9. Then it pulled back to 7 point something in 1980. From 1980 for 22 years the weakening of the rupee happened seven folds. It went right up to 49.


The longer term trend is telling us that, however I look at it, we are getting at least a minimum of 65 for the rupee in 2013. One cannot interpret this late call. I had said in August 2011 when the rupee was quoting at about 45 that it is heading for 65. I am just reiterating that call.


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Q: How do you approach the market in terms of looking for a long opportunity? When would you take the call? Would you want to see the market banking at particular levels or breaking out above a particular level? What is it that you are watching for on the index?


A: For the extreme short-term, I am long on the market. I want the market to stop me out of my position. I am maintaining a trailing stop loss of about 5,585 On the Nifty. So, I do not want to preempt the market. If the market were to drop below 5,585, it will stop me out of long positions. That should be the stop loss, if one is trading long. But, if one is looking at medium term, it is not a sensible time to create long positions, even if the market were to go above the October 5th high of 5,815, the upsides are quite limited. But, we will know one way or the other, in this week.


Q: Many of the auto stocks have had terrific run in the last two-three months. Has the time come to take profits from the names of Tata Motors, Maruti Suzuki etc?


A: There is a good warning sign in auto sector. The BSE auto made a high in April 2012. But, now it is struggling to cross that particular high. That is giving a message that the trend is lagging and there is warning sign coming through from the auto sector.

The auto sector is quite important because right from 2000, it has been leading in every highs and lows. So, the point that it's lagging, is a bit of a warning sign for the market. I have been bullish on M&M within the auto space and that is the strongest. But, it's time to pare down your positions, if one is long.



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First Published on Nov 15, 2012 09:46 am
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