The Economic Times daily newspaper is available online now.

    A short-term bounce likely before Nifty heads for 14,000: Jai Bala

    Synopsis

    “The Indian market needs to go below the March low for it to find its footing but there is a possibility that it could stretch to 15,400 in the short term bounce over the next four to six weeks and make people forget what has happened over the last several months and then once again the larger decline to 14,000 that I spoke about since November is going to take place.”

    Nifty Smallcap may correct another 10%; hold cash & invest at right time: Jai BalaETMarkets.com
    “Nifty IT Index should drop somewhere close to 25000, not the exact number but somewhere close to it. It could see a short term bounce but it all depends a lot on TCS and Infosys,” says Jai Bala, Chief Market Technician, Cashthechaos.com.

    As you told us earlier last week, we are probably headed to 14,000 before we make a recovery. It is playing out exactly to the script. Are we already in that oversold territory? Are we seeing panic selling set in? Where do you see the markets headed from here on?
    Let us divide the market into two timeframes; one for the short term and one for the medium term. From a short-term timeframe yes, the markets are looking a bit stretched but markets breaking the low of March will give a durable bounce. The fact that the market did not break it is what is making the market come back and try to break that low.

    Looking at the global markets, the Dow Jones Futures in the overnight trade has broken below its low and it is trying to complete a structure. So basically, if the US markets were to turnaround after breaking the low in the regular session of the US, the chances of the market making a short term bottom is quite high.

    Unlock Leadership Excellence with a Range of CXO Courses

    Offering CollegeCourseWebsite
    Indian School of BusinessISB Chief Technology OfficerVisit
    IIM KozhikodeIIMK Chief Product Officer ProgrammeVisit
    IIM LucknowIIML Chief Executive Officer ProgrammeVisit

    But the Indian market needs to go below the March low for it to find its footing but there is a possibility that it could stretch to 15,400 in the short term bounce over the next four to six weeks and make people forget what has happened over the last several months and then once again the larger decline to 14,000 that I spoke about since November is going to take place, that is the hypothesis I am working with at the moment.

    What is the outlook on the entire IT basket? That is not a place to hide any more. What is the sense that you are getting when it comes to the Indian tech basket?
    A valid question and for a breakdown coming through in two of the biggest IT names – TCS and Infosys – is not a surprise to me. I have been saying since January that the IT sector is bound for a correction somewhere to about 25,000 and TCS breakdown is actually a little bit disturbing to my short term thesis that the market could find the bottom around just below the March low.

    Probably the market is going to develop something which I am not envisaging at the moment but this breakdown is a little bit out of context. I was expecting this breakdown but occurring at this point near the low, is making me go back to the drawing board and see how to rework this.

    As I said, the Nifty IT Index should drop somewhere close to 25000, not the exact number but somewhere close to it. It could see a short term bounce but it all depends a lot on TCS and Infosys.

    Where do you see the Bank Nifty Index headed from the current levels?
    There is a little more clarity when it comes to the banks. It does look like the banking index might manage to hold up about the March low of 33000 which is just about 200 points away. That is an important support and I do not think 32100 is going to break now.

    But even if it does break now, the medium term picture does not change. If the banking index bounces somewhere close to 35,500-36,500 and then leads the markets lower on the next leg or breaks the March low and then bounces back to 35500-35000 again and then goes to somewhere close to about 27,000 that is my medium term objective since January for the banking index.

    In the short term it is slightly outperforming and I expect it to continue to outperform but the next leg of the decline which I envisage for the market to about 14,000 is likely to come from the banking index.

    What is your reading of how the S&P as well as Nasdaq charts are going to be like from here? They have a bearing on how the Indian IT stocks are getting whacked.How much more downside are you pencilling in for US equities?
    That is an important macro point. They have come to a very strong support zone of about 3800 on the S&P and the Nasdaq too has got a significant support slightly below yesterday’s low. So, they are all at a very important strong support zone but once again from a medium term perspective, I expect S&P to drop to somewhere close to about 3,200 if not lower, maybe 2,900 but not now.

    I see a bounce there too, it is a number of sentiment parameters and the stocks that I track are showing signs of a recovery in the short term. So medium term for the Dow Jones my objective is about 26,000 but right now, the only index that is outperforming on the US markets is the Dow Jones which has not broken too much below the March lows and that too has broken below the low and that completes a short term form for the index. I anticipate some sort of a relief rally to come through the US markets. That is driving the overall thesis for me.



    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more


    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
    The Economic Times

    Stories you might be interested in