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‘Don’t see mkt heading lower, 7500-7700 strong resistance’

Emerging markets are bogged down by what is happening in the commodities space, currency and flows, which are all interlinked, says  Sanjay Dutt, director, Quantum Securities.

He says the market has been fairly resilient at the 7500-7700 level and will continue to remain that way. “Markets have done their price and time correction both if you look back and see, everything has been thrown at the market right from the unfortunate terror attacks last week in Paris to currency weakness, to commodities collapsing to new lows, everything has been thrown at the markets and markets have fairly held out,” he told CNBC-TV18.

That’s not all. He says: “There are companies across commodities which are there in the index basket as well as the broader midcap indices, there are companies which are impacted by the currency, there is IT, etc., which are also in the basket.”

Jai Bala of 1857 Advisors too is long on the market. He believes 7619 to be a very crucial level. “The market has actually clocked a higher bottom at 7714 and now what we need to see the market do is that it needs to eliminate the alternate barrage possibility,” he adds.

In the short-run, Bala wants to see Nifty close above 7940, which he believes to be an important resistance for the market. 

Below is the verbatim transcript of Jai Bala and Sanjay Dutt’s interview with CNBC-TV18’s Sonia Shenoy and Anuj Singhal.

Sonia: It was purely short covering that we saw this week, give and take everything the market has fallen from that 8300 level to about these levels of 7850 or so in the last two months, is there more downside in stored?

Dutt: One, this market does not have a memory on a day to day basis. Day before yesterday it was 100 points down, then we saw 100 odd points up. On Friday we saw a negative open to a very strong positive intraday movement. It is a market which is just meandering. When I look at it, it is a market which is broadly a victim of this trinity and that trinity being commodities, currency and flows which are all inter-linked. That is exactly what is bothering us. That is kind of bothering the entire emerging market game plan at this point of time.

So, one can’t say that there was short covering, so therefore markets went up but next day they go down again, so you don’t know what to play it with, suddenly you look for reasons for it to go down.

So, till this entire process of bottoming out, emerging markets kind of settling down and I think we are towards the end of it. Till this settling down doesn’t happen, we will see this flip flop continuing and every other day a new factor playing out.

Anuj: Having said that would you stick your neck out and say that the recent low of 7540 will not be breached and we will not go much lower from here?

Dutt: Oh yes, no second thoughts about that. Markets have done their price and time correction both if you look back and see, everything has been thrown at the market right from the unfortunate terror attacks last week in Paris to currency weakness, to commodities collapsing to new lows, everything has been thrown at the markets and markets have fairly held out.

The reason why I am saying so is because there are companies across commodities which are there in the index basket as well as the broader midcap indices, there are companies which are impacted by the currency, there is IT, etc., which are also in the basket. So, everything has been thrown at the market and we have seen it is fairly resilient, that 7500-7700 kind of level is fairly resilient. I think from now on there is no reason to really worry as to we will go back any where below that, I don’t think so, no.

Anuj: Technically would you say that a bottom is in place and would you be long on the market now or would you be short on the market?

Bala: We are definitely not willing to be short on the market. We have positioned ourselves long on the market. We have repeated a couple of times in the last couple of weeks that 7619 level is a very crucial level. The market has actually clocked a higher bottom at 7714 and now what we need to see the market do is that it needs to eliminate the alternate barrage possibility. That will happen when the markets closes above the descending trend line which is currently placed somewhere about 8190-8225. So, there is a bit of a headroom there.

However, on a short-term basis we want to see the market close above 7940. That is an important resistance for the market. The market came down from that level on Friday. The reason for market coming down from there is 7940 is a very important resistance. If you see a close above that, it is an early sign that the market is trying to rocket up. So, we want to see the market close above 7940 as a initial level and once that happens we can be little more confident that the thesis that we are holding and projecting that the markets bottom is already in we will come to fruition.

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