Technical analyst Ashwani Gujral believes that there is no direction in the market as of now. It continues to move around a 1000-points band.
He feels that the Nifty continues to bounce between 2900-3200 kind of levels, and till it breaks those levels, the market will remain aimless.
As of now, Gujral believes that it is the time to maintain stop-loss for long positions. The markets have not been seeing any institutional participation and weak global cues, so this phase will continue for the next 1-2 months, he adds.
Excerpts of CNBC-TV18's exclusive interview with Ashwani Gujral:
How are you gaming this market because traders would be a bit confused; it looked weak a couple of days back and now it has bounced back and it would appear strong, the way it has bounced back. How do you trade and what is your sense of the direction now?
There is no direction as of right now. We are just aimlessly wandering in a 1000-point band on the Sensex, which means that 2900 will break only we get some severely negative global cues. Otherwise we will keep bouncing around 2900-3200 and back.
So basically, one has to trade in this range till we get out of it. If we break 3200, a significant bottom would have been confirmed but if we break 2900 only, then there will be a significant downside. In a sense, what we have established is probably a stop loss for all the long positions.
If we react today probably, it is a good idea to go long with a stop loss of about 2900 and try to ride it up to 3200. But these day-to-day up and down moves or a couple of days of up-move really does not mean much because they can happen easily on short covering.
There's not much to talk about institutional numbers so I do not think there is huge institutional participation. It is just that if one does not get weak global cues, one tends to rally up to resistance level and then back, so this kind of movement may continue for the next 1-2 months.
How do you read the band that it is currently bouncing in; do you read it as relative weakness or relative strength?
Basically it is lack of interest by most players, it is just traders who are playing against each other. So I would not read too much into it from a long-term point of view. We are not falling too much so the confidence does not get shaken further. But these day-to-day moves do not mean much unless we are able to take out the boundaries and till then, one has to be on the right side of the market.
What are your thoughts on all banking stocks?
Banking stocks are now bottoming out assuming that at some point in the future, the interest rate cycle will turn down and they can foresee it. So probably, one has seen the worst in banks but one needs to enter them on reactions because in case there is some hawkish comment in the world, they will tend to react.
So one needs to be careful with them and not try to ride the momentum. Wait for the correction, keep a stop loss at the lowest point they had in the last 10-15 days and then go long in them. I think the worst in banking is probably over now.
How has the auto pack shaped up?
They are in a soft patch right now. They will probably take a while to bottom out as the banks did. I think it is best to stay away from them because they will remain range-bound like Tata Motors around Rs 650-660 will get support, it will ride back to about Rs 800. But it will not hit new highs, even if the market hits new highs. So one needs to keep away from the autos they show more strength.
The sectors, which are really showing strength are cement, IT and to some extent FMCG and probably banking, which will give higher percentage returns from here. So one needs to position oneself in sectors, which are showing more strength and get out of the lagging sectors, which could be metals and autos for a while.
What about Nagarjuna and Unitech?
For Nagarjuna Construction, the support is around Rs 195. Unless it can take out Rs 288-290, I do not think it can get out of the woods really. Construction stocks have weakened quite a bit and they are likely to underperform for a while.
So I would keep away from Nagarjuna Construction. Unitech, on the other hand, does not have a chart because it moves from circuit to circuit; it is not really a trading stock. I would keep away from that.
Two financial stocks, Vijaya Bank and Indiabulls?
Vijaya Bank crossed that resistance of Rs 37 and now if it can stay above Rs 41, probably Rs 48
Indiabulls has a key make or break level around Rs 260-265. Below that, it continues to remain sideways and probably may remain weak, if the market volumes remain weak. So Indiabulls will gain strength or really make new highs only above Rs 260-265. Anyone who has bought it, needs to have that target inorder to book profits.
Two chart checks; India Cements and Deccan Aviation?
India Cements got support at lower levels. I think it should head up to Rs 210. Probably Rs 80 is the peak for Deccan Aviation. I do not think this 14-15% rally really turns around anything. If someone had bought it at Rs 66, I think these rallies are a good point to get out of the stock.
How do you read the opening? You said that at a decline, you would go long again. Have those levels come?
That would probably be much lower. I think Nifty could test 2,930-2,950. But today's opening has been quite soft and people who are trading with the perspective of a day could really short with a stop loss of about the high of the day, which is 3,053.
I think market should remain soft today. Broadly, still there is no direction unless we cross 3,050 to about 3,080; this was just a short covering rally. A couple of up-days have happened, so I think a couple of down-days might be in order. There is no real trend in this market, as of now.
You would not say that there is any shorting opportunity in this market?
The Index could be shorted each time we go closer to 3050. Probably, some of the weaker sectors like metals or autos can be shorted. But one needs to understand that the market range is so narrow that one needs to get out fairly quickly either on the long side or on the short side.
It is very easy to get chopped off, so keep volumes low and trade only when there is a significant opportunity. Often what I have seen is that if there is a gap-up opening, people get stuck on the long side and if there is an intra-day reversal, it is the time you get much better gains.
But if there is a gap down and goes past the break-even, it is a good time to go long because you have supports from those shorts, which get stuck underneath. What happened on Monday gave you fairly significant moves.
So look for those indications to have certain people against the trade because there is no institutional participation. It is very easy for the markets to give up the gains that it has made.
The two stars this morning, SRF at Rs 192 and Prism at Rs 29; technically how do they look?
I am not a big follower of either of them. We are concentrating on large caps at the moment.
What about the large cap cements like Grasim, Ambuja, ACC; which one do you like?
ACC looks much better. All of these cement stocks did not decline a lot and have shown fairly impressive break outs. Above Rs 2020, Grasim really gains strength and probably another couple of 100 bucks is possible from here. If ACC can sustain Rs 820-Rs 825, then Rs 900 could be on the cards, provided the market also moves up to about 3200. So cement is expected to lead from here along with tech.
What about some of the pharmaceutical stocks, Ranbaxy for example has moved about 11% in the past 3 trading sessions. Do you like anything there?
Ranbaxy seems to be showing that it has probably hit a bottom around Rs 315-320. So on declines, one can buy. Cipla is also showing some traction; it has a pretty fixed stop loss at around Rs 205-210.
Whenever you have a defined risk, it is possible to trade on the upside. But broadly, the market does not have a lot of tail wind at this point and no major institutional participation. So stocks are not going as far as they normally would. So let the market get into some kind of trend before you take large positions and expect larger gains.
What about Balrampur Chini; it's a big midcap at Rs 91 now. Where is it going?
Sugar has weakened quite a bit. Balrampur actually broke down below this Rs 93-95 sort of support. Still Rs 80 is the next support but sugar is not showing a lot of traction. I think it needs to get past Rs 97 to show any sort of major strength, probably it's better to keep away from that.
Any disclosures you would like to make?
I have some short positions on the Nifty right now.
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