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“The Nifty small cap index is at about 8800. It needs to go somewhere close to the 8200 mark and so another 10% fall for the small cap index before it can be seen as a strong support area,”a says Jai Bala, Chief Market Technician, Cashthechaos.com

Let us just talk about the kind of crack that we have witnessed in the equity market. Nifty had gone below 16,000 but has recovered now. We are still staring at a cut of about 60 odd points on the frontline index. Just a couple of days ago, you said that the expectation is that the Nifty could drop sub 14,000 before this correction ends. Are you sticking to that thesis?
For the extreme short term, the market could do one of the two things: It could hold the March lows and it could have a reasonable counter trend rally that takes the market to 17,400 or it could break the March lows and then bounce back, basically that is the short term. From the medium term perspective, as I have said earlier, this correction in my opinion is not going to get done unless the market stops below 14,000.

What about the resilience that we are witnessing within the banking sector? Do you believe that there is merit in the kind of move that we are witnessing across private banks?
That is one of the reason why I know I had presented the two scenarios for the short term. The banking index doing a slightly different price action movement and that could be the misleading factor and the banking index could bounce somewhere close to 37300, if it does not break the low it made last week.

It could go slightly lower and still bounce but the medium term picture is that if at all there is a bounce, like the market is at the moment presenting, it could be deceiving rally that ropes the market in and people believe that this is a resilience and then there is a sharper fall later in the month of June-July. In my opinion, since November 2021, this has been a deep bull market correction and it has been playing out for the medium term. It is likely to complete that move sometime around August plus or minus approximately. We are somewhere in the middle portion of this correction and the market needs to drop a little lower to complete the bull market correction.

You are a keen watcher of what is happening across the globe as well what do you think are the levels to track when it comes to Dow, the dollar, crude, Bitcoin because you watch all of these asset classes very closely?
Yes, that is right. The dollar index still got unfinished moves. The Dow Index needs to get somewhere close to 106-107 for it to spot a complete move likewise on the Euro, in my opinion, it needs to get somewhere close to parity – about 1.02-1.03. So there is still unfinished upside for the dollar index and downside for the Euro.

When it comes to Bitcoin, it is a very good reflection of animal spirits and 29000 is a good support level for it. But it needs to consolidate around that level and take on further upsides from here. If it does that, it has got good potential but if it were to break 29,000-28,000 then it gets very negative but that is not the base case for the medium term.

I am bullish on Bitcoin but let us see what it does. The most important thing here is the US 10-year yields have come very close to 325 bps., the projection that I had from January last year for the medium term. So there is a possibility that the treasuries could see a little bit of buying. The bond prices might bounce a little bit from here but if 325 bps gets taken out, that is a possibility. The market cannot do anything but 325 bps is a very good resistance and we could see a little bit of cooling off for yields at the moment.

The broader market is getting clobbered. When we get into recovery mode, will the midcap index recover? Which are the pockets that you like? Is it the IT sector? Metals have been clobbered quite a bit.
I will put the support levels where I think these sectors should face considerable amount of support. If you look at the metals index, my projection has been above 5200 and presented that in the first week of April. The metals index needs to come close to 5200 before it finds durable support and when it comes to the IT index, I am bullish on it for the medium term. I am expecting that to drop somewhere close to 27,000 once it becomes a very attractive entry point for the medium term investors. Right now, the IT index is at about 29000.

Likewise, if you look at the Nifty small cap index, it is at about 8800. It needs to go somewhere close to the 8200 mark and so another 10% fall for the small cap index before it can be seen as a strong support area. So all of them have quite a bit of downside. So, maintain cash even if you are interested in them from a medium to long term view. To get attractive entry points for generating excess returns, one has to have patience and money in hand. So hold cash and invest at the right time.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)


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