Sensex may see sub-15000 levels, says Darashaw Co

Darashaw & Co has had a very circumspect view on the market for several months. Dr. Regan F Homavazir, CMT, associate vice president, technical research of Darashaw & Co says, the current rally has not changed that view. The long-term picture still continues to remain bearish.

According to him, the rally at best will go up to 5,400-5,500. Should the Nifty cross above 5,500 then the base has shifted higher. In the absence of that, we will continue to remain bearish and sub-15,000 levels are a possibility, he adds.

He further says, 5,200 has now become a key support for the Nifty. Should 5,200 be decisively broken, 4,700 is a very bright possibility.

Also read: Nifty may slip to 4700, sell on every rally, says Anil Manghnani

Below is the edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q: Has the current rally changed your view or do you think its just a pullback still which will top out soon?

A: First and foremost, let me just clarify that the long-term picture still continues to remain bearish. At the moment, you are seeing one of a countertrend rally in the larger term picture. This rally at best will go up to 5,400-5,500. The longer term parameters that had deteriorated during the fall continue to remain bearish. 

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Q: What kind of downside risk would you still see present for the market? Do you concur with the opinion thats its still a 4,700-5,200 range or can the market pierce that 4,700 mark on the downside?

A: Its a step-by-step process. So, the Nifty will first have to decisively close below 5,200 for 4,700 possibilities to open up because 5,200 has now become a key support. In the recent price action, there was an island gap there which has been filled. So, we have bounced from there. Now, we need to observe whether 5,200 is decisively broken. Should it be decisively broken, 4,700 is a very bright possibility.

Q: Earlier you had targets on the Sensex which were sub-15,000. Are these targets still in place or do you think the base might have shifted higher?

A: The base hasnt shifted higher conclusively. It is very difficult to gauge at the moment whether the base has shifted higher because should the Nifty cross above 5,500 then yes the base has shifted higher. In the absence of that, we will continue to remain bearish and sub-15,000 levels are a possibility. 

Q: When you analyse the charts both of the S&P and the Dow, tying it in that, what you see on the Sensex and Nifty?

A: The Dow has been in an up run. We had identified this level of 10,600 where the Dow came and rested for a little while and then has gone in a springing upmove. It has come exactly to the resistance of 12,350 and upsides look very limited on the Dow now. Considering that and the Nifty, which looks like it has run into a resistance, we would be very cautious at this current price point.

Q: Do you track the dollar index at all, technically?

A: We do track the dollar index, yes. It appears very neutral.

Q: What are your thoughts on the Bank Nifty?

A: I would say the Nifty has that downside risk more than the upside potential. Reason being stocks like Axis Bank , ICICI Bank , HDFC have all run into resistances. So, with that and the Nifty running into resistance, its all coinciding with one another. I would be extremely cautious on the bank index too.