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Crude rally may push Nifty below 4,250: Ashwani Gujral
Published on Thu, Aug 28, 2008 at 09:29 , Updated at Thu, Aug 28, 2008 at 18:03
Source : CNBC-TV18
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Excerpts from CNBC-TV18’s exclusive interview with Ashwani Gujral: Q: What are the chances of breaking 4,200 on the way down or higher or breaking 4,400 on the way up or higher? A: One should trade once levels are broken but since this rally was led by interest rate sensitives those stocks have started weakening. Crude is tending to stay above USD 115 per barrel more than it is tending to stay below USD 115 per barrel. So, that rally is tapering off and markets are forming lower lows now on banks and real estate. Yesterday last half an hour was one such example. If crude moves above USD 120 per barrel, Nifty could come down below 4,250 and even revisit lows because the rally is now really losing momentum on the upside. Unless crude can break down below USD 110 per barrel and commodity decline starts again, it looks very difficult of how we can cross this 4,450 levels on the Nifty.
Q: What’s the technical situation for crude? You spoke about that USD 110-120 per barrel range but do you think those targets of USD 108 per barrel or even lower are still in place? A: It’s behaving like what we did in March 2006 with the Nifty. It came down below the 200 Daily Moving Average (DMA), which in this case for crude is about USD 110 per barrel and then we just shot up and made a new high. After such a big bull market generally things tend to correct and then they have a sudden large move on the upside. So that is possible once we cross USD 122 per barrel, which was the previous intermediate high. If it was really weak, it won’t be gaining strength on the kind of news that’s happening and the demand destruction story would have played out much more than it is doing right now. So clearly at 4,200-4,600 on the Nifty, banking, financials, real estate type of stocks are making intermediate toping out patterns. While Nifty may consolidate and some things may go up or go down, interest rate sensitives could take a bashing over the next couple of weeks.
Q: Can you initiate a trade just around 4,300 mark? A: You can initiate a trade but probably keep volumes half of what you generally do because the market is choppy. If it moves against you by the end of the day, you may have to get out. So it is not a good idea to be very aggressive, wait for 4,250 to breakdown or the higher end of the range to breakdown.
Q: What are you doing as a trader right now is it that kind of a period where you say there is no joy in trading, you won’t get a big move, you should just protect your capital and probably come back to trade when a bigger trade is visible? A: The market went up for four years and came crashing down in seven months. If you have to go light for the next couple of months there is no harm in that. If 3,000 on Nifty were seen there is no harm in taking up a financial, metal. So try to take smaller positions and different sort of sectors, which move opposite to each other because the moves will be small. You need to capture the trend wherever you get it rather than taking big directional bets. It is important that you diversify a bit more and keep your risk small. These ranges don’t survive for all times to come. Sooner or later there will be a trend. One needs to keep your powder dry, so that when you get that trend you are in the market.
Disclosure: Short positions on Nifty, no stocks. |
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