Gautam Shah of JM Morgan Stanley Financial Services expects strong support for Nifty at 3780 while that for Sensex at 13,100. According to him, the short-term target for Sensex is at 13,900, and for Nifty is at 4,000.
He expects techonology and metals to do well in the short-term. He also adds that Sensex may test 15,500 by February-March. As a tradeing strategy, Shah advises that an aggressive trader can buy Nifty at current levels with support at 3780.
Excerpts from CNBC - TV18's exclusive interview with Gautam Shah:
It's been a rough day for the market, where do you see the correction stopping or do you think it will be a deeper cut for the market?
It does not look like a deeper correction. In the last few months, we have been in a beautiful uptrend, which has seen routine consolidation corrective phases.
Last week, when we tested the stop over resistance point of 13,500 and 3900, we thought that there would be a couple of days of correction. It has continued today.
It might just continue for another trading session. The downside from current levels is very limited because 13,100 on Sensex and 3780 are important support levels and I would not be surprised to see a rebound coming in from these levels. There could possibly be a V-shaped recovery taking us back to 13,500 and 3900.
What is your short-term target for the Nifty and what will you do as a trader until it reaches that point?
A couple of weeks back, we talked about 13,200 on the Sensex and once that was tested, and once we absorbed the supply at 13,200, which was an important supply point, we updated our targets to 13,900 and 4000 on the Nifty. So, we still maintain the levels of 13,900 and 4000.
A trader of Nifty need not panic at current levels moving average support levels have really helped these markets rebound on any decline in the last couple of months. So as I just mentioned, unless 3780 on the Nifty is broken on a closing basis, we are not talking of any cutting of long positions.
The bigger problem is in the midcaps. If the view is that the Index will go up, will it be a narrow kind of move once again or do you think there will be broader participation because that is not coming in?
In the last 2-3 weeks, there has been broader participation, one has seen the midcap stocks do well. Yes, it has been a bit selective, not the kind of rally we saw in the month of March and April this year but it has been selective.
As I always said, one won't see a market top out unless midcaps and smallcaps do well. And I strongly believe that the month of December and January will favor the midcaps, and that is the time we might just begin a blow off process, which looks very far away right now.
For the frontliners to exhibit more strength, which are the heavyweights - which are the sectors that you are backing at this point?
Clearly, there is sector rotation taking place. We have seen that happen in the last couple of months. When FMCG is doing well suddenly, you have the PSUs correcting, technology was correcting for sometime and some of the other Index heavy weights have done well. So, it is because of this sector rotation that the markets are not able to see big 200-300 point jumps.
But at this point, we continue to like cement; that has been the favorite for the last couple of months and apart from cement midcaps, technology is a sector, which looks good from a short-term point of view. PSU stocks are likely to do well in the next couple of months and metal stocks, which have been a laggard in last 3 months, should gradually participate in the rally maybe in the next couple of weeks.
What is the eventual target for this market now that 13200 has been crossed. Where do you see this market eventually moving in January or February when do you believe that it will top out?
There are three factors here - one is the seasonal aspect, the technical aspect and the sentimental aspect. Seasonal wise, we are in the best period when the markets can rally. November to January is the best period for our markets, not only for our markets but world over.
In the next couple of months, we don't expect a top out. Sentimentally, we know the put-call ratio is nowhere close to the levels we saw in the month of May. Technically, there are a lot of triggers in the daily charts and weekly charts, which tells me that in the next 2-3 months, we could be testing a level of 15,500 on the Sensex. We are talking of a top out possibly sometime February-March next year. By that time, we should be at a level of 15,500 which could well be exceeded.
What are the metrics that you apply to expect to see the midcaps recover in December-January? Do you look at the midcap Index? Do you look at a basket of very liquid midcap stocks? How do you take that call?
We do both. We look at a basket of midcap stocks and some of the realty stocks did extremely well in the last couple of weeks. As a midcap sector also, because it has not traded, we don't track it on a daily basis. But just like the Sensex tested the stopover resistance point of 13,500 even the midcap sector tested its resistance last Thursday- Friday.
It is just a routine correction and this might just be a final opportunity to get into midcaps because possibly starting next week and entire month of December and January, you should see midcaps doing well.
What do you do now as a Nifty trader, we are at 3800 now, do you buy this decline or do you wait to see if 3780 is breaking and take a buy call only there?
An aggressive trader can buy Nifty at current levels keeping in mind the support of 3780. But at the same time, a conservative trader could do is just wait out for a next couple of trading sessions - maybe today, in the second half and tomorrow.
If the Nifty were to reverse from 3780, then one can comfortably enter a long position because the next top for the Nifty might be all the way up to 4000 because 3900 supply seems to be getting absorbed.Chat with market expert Pranav Sanghavi every Tuesday
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