Bearish on market; RIL exerting pressure: Cashthechaos.com

In an interview with CNBC-TV18, Jai Bala, Chief Market Technician, Cashthechaos.com said he has been bearish on the market.

According to him, there are two possibilities right now. One, he said, this market drops to about 5,450-5,400 and then pulls back one more time and exceeds the high it made last week and then it begins to decline. Two, he said, the market busts right through this 5,400 level and declines very sharply.

He further said Reliance Industries is exerting pressure on the whole market. The overall structure on the upstream also oil and gas space is also not looking good, he added.

Also read: See market giving 15-16% return by year-end, says Citi

Below is the transcript of his interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18. Also watch the accompanying video.

Q: What is your judgement on the market?

A: The market made a high of 5,600. This is exactly the level we were expecting the market to hit. In my previous interview, I had said that market is not likely to head over 5,650.

There are two possibilities right now. One, this market drops to about 5,450-5,400 and then pulls back one more time and exceeds the high it made last week and then it begins to decline. Two, it busts right through this 5,400 level and declines very sharply. I am working with one of these two possibilities.

If you look at the market from a laymans perspective, the market has actually spent a lot of time moving down. If you look at January also, the market has spent more time going down rather than going up. This is quite a bearish scenario. And thats exactly the reason why I have been bearish on the market.

And if you see Reliance, that also made a new high and reversed sharply. And that is exerting pressure on the whole market. The overall structure on the upstream also oil and gas space is also not looking good. But the important levels have not been broken, but it looks like thats coming quite soon.

Q: What about the banking space?

A: At the moment, they look alright. But what has happened over the last few weeks is just a sideways movement and the Bank Nifty has faced resistance at the 11,000 level. Now, if it breaks 10,300, I think the acceleration to the downside will get more quicker. But this time around I think SBI will get spared, but it could be the other stock in the sector which might take the lead to the downside.

Q: What do you reckon, not just for Reliance, but even for ONGC ?

A: ONGC is making a very important formation. If the stock does close below Rs 265, then the implications for the entire market is going to be really bad. You can expect this stock to shave off at least somewhere about one-third of its value. That is a very huge pattern thats in under development. The ONGC is at a place where it must hold Rs 265 for the longer-term trend and for the better prospects for the Indian markets as such. If it break Rs 265 on a closing basis, its going to be really bad for the sector and for the entire market.