Chances of Nifty going below 2500: Sudarshan Sukhani

A: Yes, very big falls. In fact, they underperformed the market yesterday and Wipro was the remarkable candidate something is going on there. At this point, the impression is that they are breaking to new lows. This market is really choppy and volatile. Just ten days ago, I had the impression that IT was going to do better relatively better and now the story seems to be just the opposite. For all I know, ten days later they will again start outperforming. At this point as we speak, IT is giving the impression that it is on the verge of significant breakdowns.

Q: What about stocks which have broken down already. Stocks like SAIL (Steel Authority of India Limited) and Nalco (National Aluminium Company Ltd.), which got drubbed some more yesterday?

A: Everything is getting drubbed, so one doesn’t buy them. In the steel sector, the only stock that I was suggesting was Tata Steel, which got drubbed even more. Nalco is not a buying opportunity if at all you want to be adventurous then Hindalco has been beaten out of shape and that’s a stock that somebody can say okay either it will go to zero or it will give me some money. But this is in any case not a time to go and do bargain hunting. I want to make a point, there is a view that the markets are trading so much below the 200-day moving average that soon we will see a bounce and a reversion to mean that need not happen in 2004–06, the market traded above its moving average for 18-months before coming and touching it. So we could keep on trading below the (MA) moving average for 18-months. We have done that before.

Q: What do you see on the charts of State Bank of India (SBI)?

A: Same story as IT. It was giving the impression that it is going to outperform and now again it is coming down to support and giving the impression that it is reaching Rs 900 very soon. The Nifty which is the broad index tracking all bank stocks has virtually given up after showing signs of light, showing signs of outperformance. The impression now on the bank Nifty is that it is heading for – it is going to break those October lows much before the Nifty. So suddenly banks are a no go, even PSU banks one can probably get them at much lower.

Q: Can you initiate a trade under 2,700 or do you think it’s likely to be volatile and short-term trades won’t work?

A: I think today is not a good day to go short. We have seen five days of down moves so one never knows what the market will do and I would hate to go long even for a day trade. It is possible that a day trader may make some money on the long side today, I do not know. So the answer is I do not think today at this point there is any trading opportunity for intraday traders or even for swing traders. 

Q: How are some of the smaller metal stocks looking to you now something like an Ispat or JSW?

A: Do not buy anyone of them not even for intraday trading. They are completely out of shape, they have fallen out of the charts and there is no seen in trying to trade also in these stocks. So Ispat of course is in the same category as IFCI, you don’t even think about it.

JSW will recover at some point of time that point of time is far away, so forget it. In any case even for traders the focus should be on the blue chips, the better quality at least the prospects of zero level is not there. So I would not suggest any of these stocks to be traded either.

Q: You have got a 50-point Nifty move, 200-point Sensex move at any point during the day, would you start considering opening up that short or you let today pass don’t take a short call at all?

A: No, don’t take a short call at all because we have seen a very decent and big decline, so this is primarily a relief rally and let this rally fizzle out, move wherever it wants to go. These are corrective moves, the upmove that we are seeing whatever points 50-points, now it is not easy to trade these corrective moves. The primary trend is a trend that should be traded; so I would not try to go long and today is not a good day to go short, we will just let it be.

General Disclosure:

It is safe to assume that my clients and I may have an investment interest in the stocks/sectors discussed.