Sushil Kedia sees 2-3 month pain followed by 'super bull mkt'
With selling intensifying in the past few days, technical analyst
Sushil Kedia says the ongoing correction has further legs to go but adds that
there is a pot of gold at the end for investors who can ride the pain.
With selling intensifying in the
past few days, technical analyst Sushil Kedia says the ongoing correction has
further legs to go but adds that there is a pot of gold
at the end for investors who can ride the pain.
In an interview with CNBC-TV18,
Kedia, President of the Association of Technical Market Analysts (ATMA), picked
out 7,200-6,900-6500 as technical supports and assigned small probabilities to
those levels breaking. "This roughness is likely to persist for some more
time," he said.
"However, [starting] financial
year FY17, wherever the decline ends, a 40-50 percent kind of super bull market
should again rise," he said.
Kedia said crude will likely bottom
out soon, and said in 1-2 years, it could more than double from current levels.
In a bold contrarian call, he also said
the US dollar rally is likely to end -- which will make the ongoing yuan scare
a "bogey" -- and forecast the Indian rupee to test 64 to the
greenback likelier than 67, with even sub-60 levels possible during the year.
Kedia had a bold call on gold too,
saying if the yellow metal were to take out USD 1,220 per ounce, it will likely
go all the way up to USD 2,000.
Excerpts from the conversation on
CNBC-TV18.
Sonia: It has been a rough start to the year but what is your own forecast?
A: When we talk about the year, this roughness is likely to persist for some more time. I don’t know if 6,900 will be a strong enough support; 7,200 looks like will be a feeble support. In terms of where it might be really over, I don’t this market can decline under any situation below 6,600-6,500.
So, 1 percent chance of Nifty slipping below 6,500 in 2016, 5 percent chance perhaps below 6,900 and maybe a 10 percent chance for 7,200 to be just a very feeble support. However, there onwards, if I am not talking about calendar 2016 and I am allowed to talk about FY16-FY17, from wherever it ends a 40-50 percent kind of a very swift powerful super bull market should again arise. There are a lot of bad things to still happen before that.
Latha: One of the factors that have been driving down the market has been the crude charts as well indicating fairly dismal global growth. Does that bottom at this USD 33-32 per barrel levels or like some dooms day profits saying going below USD 30 per barrel?
A: I will cut this into two timeframes. For the immediate timeframe, maybe around two to three weeks I am looking at a rally of at least 20 percent and I can’t rule out it to be rebounding back to 30 percent. These are actually not huge numbers vis-à-vis the massive volatility in crude now and if I take a structural longer term view, crude has actually been in a continuous decline through massive in between rallies for the last eight years.
Right now it is looking like this almost eight year long pattern on crude of a massive sideways band of correction running from USD 140 per barrel down to USD 40 per barrel and lower is quite likely getting over. I will like to place a bet that the chance of a 150 percent rise in crude going forward over the next one to two years is far brighter than a further 15 percent decline.
Sonia: Let us talk about some pockets now. Since you did mention that 7,200 in all likelihood could be breached in the near-term, what are the pockets that would lead it there and what are the pockets that could be hiding place?
A: Hiding, I doubt if there is much of space for one to hide in. However, say for the very short run while this continued decline is there, the oil and gas space I think will be the most badgered one. Autos will get badgered further.
There will be a softer decline of say perhaps 10-12 percent in pharmaceutical and I doubt, even if metals are looking like on a eight to nine year timeframe kind of very long-term correction cycle is getting over, who knows right at the end of this tunnel a 30-40 percent kind of slide is still pending in them over the next couple of quarters.
Latha: Banks and especially Bank Nifty?
A: Banks looks like they have come off much faster than others. So, by that count maybe the decline in them might be a little softer, maybe about 10 percent. If say there is an interim rally erupting from 7,200 to wherever it goes back to 7,900, 7,800 or 8,000 banks might provide you another larger rallies and softer declines.
Sonia: It has been a rough start to the year but what is your own forecast?
A: When we talk about the year, this roughness is likely to persist for some more time. I don’t know if 6,900 will be a strong enough support; 7,200 looks like will be a feeble support. In terms of where it might be really over, I don’t this market can decline under any situation below 6,600-6,500.
So, 1 percent chance of Nifty slipping below 6,500 in 2016, 5 percent chance perhaps below 6,900 and maybe a 10 percent chance for 7,200 to be just a very feeble support. However, there onwards, if I am not talking about calendar 2016 and I am allowed to talk about FY16-FY17, from wherever it ends a 40-50 percent kind of a very swift powerful super bull market should again arise. There are a lot of bad things to still happen before that.
Latha: One of the factors that have been driving down the market has been the crude charts as well indicating fairly dismal global growth. Does that bottom at this USD 33-32 per barrel levels or like some dooms day profits saying going below USD 30 per barrel?
A: I will cut this into two timeframes. For the immediate timeframe, maybe around two to three weeks I am looking at a rally of at least 20 percent and I can’t rule out it to be rebounding back to 30 percent. These are actually not huge numbers vis-à-vis the massive volatility in crude now and if I take a structural longer term view, crude has actually been in a continuous decline through massive in between rallies for the last eight years.
Right now it is looking like this almost eight year long pattern on crude of a massive sideways band of correction running from USD 140 per barrel down to USD 40 per barrel and lower is quite likely getting over. I will like to place a bet that the chance of a 150 percent rise in crude going forward over the next one to two years is far brighter than a further 15 percent decline.
Sonia: Let us talk about some pockets now. Since you did mention that 7,200 in all likelihood could be breached in the near-term, what are the pockets that would lead it there and what are the pockets that could be hiding place?
A: Hiding, I doubt if there is much of space for one to hide in. However, say for the very short run while this continued decline is there, the oil and gas space I think will be the most badgered one. Autos will get badgered further.
There will be a softer decline of say perhaps 10-12 percent in pharmaceutical and I doubt, even if metals are looking like on a eight to nine year timeframe kind of very long-term correction cycle is getting over, who knows right at the end of this tunnel a 30-40 percent kind of slide is still pending in them over the next couple of quarters.
Latha: Banks and especially Bank Nifty?
A: Banks looks like they have come off much faster than others. So, by that count maybe the decline in them might be a little softer, maybe about 10 percent. If say there is an interim rally erupting from 7,200 to wherever it goes back to 7,900, 7,800 or 8,000 banks might provide you another larger rallies and softer declines.
Happy Investing
Source:Moneycontrol.com
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