Nifty to rise above 5200, but expect flat session: Sukhani

Sudarshan Sukhani of s2analytics.com believes the Nifty will reclaim the 5200 level today, but says it will be no-trade day because the market is unlikely to run up after a 90 point decline. “The market is not showing resilience because it is in a choppy trading range,” he explained.

His strategy is to close short positions if the market moves higher in the first hour. Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video. Q: How would you trade the pullback that is expected today? Is it an opportunity to short or is this market showing you resilience? A: No, it is not showing resilience because it is in a choppy trading range. It is doing what a trading range does; it is showing pessimism when we reach 5,200 and then it bounces back. I presume that there will be a bounce back today. There are two approaches; we took some short positions yesterday in the closing moments and that will be closed if the market moves higher in the first hour. So the first hour is something that we are watching at and the bias here is absolutely neutral. I don’t see this market running up just after it fell 90 points. Chances are that it could stay above 5,200, so probably today may end up as a no-trade day. Q: Infrastructure has been quite weak the last couple of days, you would be short on a name like Larsen and Toubro? A: L&T has been weak and has not performed as per expectations but yesterday it broke that Rs 1,300 support level. That gives us an immediate target slightly below Rs 1,200. If the markets take-off in one direction that is up, then short positions should not be taken, by this time traders understand that.
But if the markets are choppy, if they are slightly up, then L&T is probably not going to be joining that bull party. The targets of Rs 1,200 are intact and whether it is today or tomorrow or in a couple of days that should come about. Q: You have got a sell out on Pantaloon as well today? A: Yes, Pantaloon has been a disappointing stock. It slides then there is a rally. That rally is a bear market rally because it quickly dissipates and comes down on larger volume. Yesterday it broke down from a trading range and I suspect there is more downside here in Pantaloon. Earlier target of maybe Rs 110-120 is intact. So Pantaloon is a sell on every opportunity. Q: Escorts lost quite a bit yesterday but you see that as an opportunity to buy the stock? A: Yes, with a disclosure that I own shares in Escorts. Escorts loosing quite a bit yesterday, is an opportunity, at least for today it is a buy-on-dips opportunity. There was a very big decline and that decline brought it to a strong support level. If the upmove, if the thrust we saw is intact then there should be buying coming in today and day traders as well can participate in that buying. You don’t have to go and buy it when the market opens. You have to watch whether Escorts or for that matter any share we discuss is now inching upward. If it is doing that it is worth buying into it. _PAGEBREAK_ Q: Reliance Infrastructure was down 10% in the last three days and you reckon there is more downside there? A: Yes there is more downside in Reliance Infra. All the Anil Dhirubhai Ambani Group (ADAG) stocks are in deep trouble except for Reliance Communication which has a long-term bullishness inherent in it. Reliance Infrastructure is again breaking down from that level of Rs 550, it has broken down yesterday and that gives us a much sharper downside target. I don’t know whether those targets are going to come but the trend is down. What we saw yesterday in Reliance Infra is not a buy-on-dips decline; it was a break of significant support. So when support breaks, first we don’t buy it and secondly, we continue to look for opportunities to go and sell it. So, I think not only Reliance Infrastructure, all the other ADAG stocks will become selling opportunities during the day today. Q: Max India is a buy in your book today? A: We had that big thrust in Max India on the back of news. It broke out of a very large trading range. The advice is do not buy on these big thrusts because markets will consolidate and that is what they have done. They have consolidated for the last seven trading sessions, almost two weeks. Yesterday we had a gain in Max India when the broad market was collapsing. It appears that the consolidation may be getting over, so the prices are continuing to remain at the higher levels. The prices have not declined, they have just consolidated. It is a very good opportunity to go long assuming there is more upside here, there should be. Q: We will probably start the day not with a very big gap, maybe just about 10-15 points if that. If you see that, would you still wind up your shorts or do you think now it is not prudent to wind up those short positions any longer? A: The shorts will be wound up only after the first one hour trading has taken place because both possibilities exist. This market could see a relief rally or a genuine rally or we could continue with our downtrend. That is not very clear. So the issue here is to wait for one hour and then if the market starts moving above the first hour’s highs that is a sign of clear strength and short positions will be closed then. Q: You were talking about the weakness on infrastructure, same story for IRB Infrastructure, down about 10-11% these last few days, what do you see on those charts? A: It is a sell but there are many other opportunities for short selling in infrastructure. So among the infrastructure stocks, IRB is a relative out performer. Although that doesn’t change the trend, the trend is still down but it might be wise to look at GMR or look at host of other stocks like HCC to sell rather than IRB. But the trend is down and there is no confusion on that part. Q: How about something like Asian Paints that made a good move yesterday? A: Yes, it did and Asian Paints has come on my buy list repeatedly not once but many times. These are stocks that are making new highs. A good pedigree stock making lifetime highs is a justified buying opportunity irrespective of what the market does. Asian Paints again is not a buy today. You wait patiently for those inevitable down days, corrections, narrow range days and that is when we should buy it. But it is a buy, just wait for it. _PAGEBREAK_ Q: What kind of targets would you short a DLF with now? A: It is just standing at support at Rs 185-188. That is the last support for DLF and the chances are it is going to break it. So an intraday target could be Rs 180 but in reality, DLF is looking at Rs 130-140. Q: Yesterday was bad day for telecom names, what kind of price levels do you see in Idea now? A: The first stop for Idea is Rs 76-77 and the chances are that it is not going to stop there. This sort of avalanche type of decline that we have seen in Idea, in Bharti, this doesn’t seem to be stemming in a day. It is not a trading range where we see two down days and two up days, this is a clear downtrend now visible on both the stocks. So levels will be broken, eventually Rs 77 is not going to hold, chances are it will go lower. Q: Any thoughts on AP Paper after its runaway 16% rally? A: Even I have heard rumours in the market that things are going to happen there but I don’t trade on rumours. This is all rumours isn’t it? I understand there is a meeting and something will come out of it. It is not worth trading rumours at all. So the best suggestion is to avoid it. Q: You have been quite cautious on United Spirits and yesterday it fell quite hard, 9% knock? A: I think it will come back to Rs 450. It started from there and reached Rs 700 and the chances are it is in a trading range where the lower end Rs 450 is going to come again and come under test whether it succeeds or not is a different issue. It is a short sell. Every rally in United Spirits is now should be sold into. Disclosure: I have investments in Escorts.