Stock pickers' market; need to cross 5340: Anil Manghnani

A couple of days before the April series expires, Anil Manghnani of Modern Shares & Stock Brokers says the series is well defined now that it has closed above that downward sloping well defined trend line. At least from a trading point of view that trend line or anything below it becomes your stop loss.

“For today it is placed at 5,280 and being a falling trend line it’s dropping by 10 point everyday. For the time being, if you are a Nifty player, you are okay on the long side, he adds.
Volumes have been very low over the last couple of trading sessions. Normally, you want a breakout with good volumes which hasn’t happened and it’s not your similar breakout to what you saw in January and February which was a typical bull market where investors were buying pretty much anything.
Yesterday, the market had a breakout day in the ratio 1:1 and enough stocks were also on the way down 2-3% which is a little rare and tricky to play right now. Manghnani feels that even if the index is going up, the stock picking becomes very difficult. “Last week we were talking about how sluggish the market is and today if you look at it there are enough stocks at new life highs, be it IndusInd Bank, ITC, Tata Motors or Apollo Tyres.”
It’s a very stock specific market right now. Traders’ big fear right now is how do you buy something that is at life highs and what if it falls after you buy? That’s probably affecting most traders today. But since the money is flowing into those stocks I think any dip in those stocks are giving the best trading opportunity.
Manghnani says that it’s not a broad based rally but a very stock picker’s market. For a couple of days we have seen the market fall from 5,340 odd which is the 50 day moving average. So that will be the first hurdle to cross. “But if it can take that out and sustain above 5,340 then you are looking at least at 5,441 which is the 61.8% retracement of the move. We have had a fall from 5,630 to 5,136. So that retracement comes at about 5,441,” he adds. Below is an edited transcript of his interview on CNBC-TV18. Watch the accompanying video for more. Q: Even if the Nifty were to climb above the levels that you are talking about, do you trust these kinds of breakouts? If it happens on thin volumes with not great breadth, does it still look like it could be a false kind of a breakout and not something that you can back for momentum because momentum is absent despite the Nifty getting close to that 5,380 level?
A: Yes, you make a valid point that the indicators that you try to look at are not great but I still think you will have to play it on the long side. Maybe the movement will be a little sluggish and slow. Probably now that you are coming closer to expiry, the calls might be a better option because the premiums would be on the lower side and not when you start a new series.
At least there your risk is low that even if you break back below the trend line you don’t lose too much. I think the name is to play on the long side strictly because after about 45 days of being in a range, you have broken out above the trend line. There is no point in us saying – yes, volumes are low. Should I play or shouldn’t? Just go for it and keep a stop below the trend line which is the safest play. Q: What’s happening with the charts of telecom stocks? Bharti made a 52-week low this week. Idea is down more than 12% in the last seven days. Are these charts breaking down?
A: On Bharti, yes, I am a little worried. It has bounced back above the Rs 319 which was the key support that it wouldn’t break right through last year, every time it bounced off that. So, having traded below that that gives me a little worrying sign. But as long as still if it’s holding Rs 319 fair enough but anything below Rs 319 it opens up another downside of Rs 290.
On Idea, you could probably say in hindsight that the amount of time it spent around that Rs 100 or Rs 95 mark probably looks like a distribution pattern on the charts and now you are seeing the effect of it. The key level for Idea even on the downside would be somewhere between Rs 83 and Rs 77. That’s where the bulk of the support is. Even if it were to continue on the downside, you need to watch out for that range. Unless that range doesn’t get taken out it will probably still be a buy at the lower end. Q: Are you buying IFCI today from the midcap space?
A: I would like to buy it more above Rs 43-43.10, not right now, more the breakout. It’s got a trend line at Rs 43 and the last 10 or 12 days I have seen Rs 43.10 has been the high. So I think if it takes out this Rs 43-43.10 range then it’s probably headed back to the February high of Rs 49 and then your stop loss will be about Rs 39. So maybe not right here but the breakout definitely. Q: Are you buying Sesa Goa today?
A: Yes, I am not one who trades metals that closely, but just from a safety point of view where your downside risk is limited because the stock hasn’t done much so, probably between Rs 192 and Rs 185 with Rs 184 as a stop. It will take time but eventually if the market does play out on the upside then it should also slowly but steadily inch back to about Rs 210 levels. Q: What kind of technical levels are you watching on the rupee? Is the rupee headed to a new low over the next few weeks?
A: I had spoken about it a month back. I said from 48.60 it would fall all the way back to 52.20 which is the exact 61.8% retracement of the move we had from 54.32 to 48.60. It has to stop here. If it doesn’t, then the next stop is back at 54.30 which would be really detrimental to the Indian market as a whole. The rupee plays a key role for the equity markets, how FIIs think about the market. So yes, there are critical levels.
It’s surprising that even though the FII flows haven’t been positive for the last month or so they haven’t been negative, just flattish. That’s even more worrying that with no money actually going out that much out of the market still the rupee is on a free fall. So it needs to stop here at 52.20 otherwise the next level would be back at the lows of 54.30.