Technical analyst, Salil Sharma says that people who are into markets for more than a year, should start picking up stocks in a small quantities.
They should be prepared for a further fall and be ready with cash to pick up even at the lower levels, he feels.
Excerpts from CNBC-TV18's exclusive interview with Salil Sharma:
Make sense of the kind of slam-dunk that we have witnessed over the last one hour of trade in the light of the global cues and in the light of the trio that is the ODI (oil, dollar and interest) rate impact?
The setting for this kind of a fall was made yesterday and in the intra-day trade we saw a huge spike. The fall, which came and we closed at the lowest end of the range yesterday, was ominous. One could expect a fall but one was looking at 200-250 point fall, which has gone slightly more in the overdrive.
In terms of putting things in perspective, we were looking at support of around 3050 on the Nifty. Since morning, this level has been tested twice and we are more or less close to that level today. So for us, the final reckoning would be whether this level holds or not.
Do you think that the time has come to start picking up stocks that you like or do you think that this market will give you another chance to buy at further lows?
It depends on one's own perspective. If one is looking at one-year time frame then definitely this is the time to look for value-buys and value-picks.
If 3050 level got broken on the closing basis then we could slide lower to around 2950. I do see a lot of value in some of the frontline shares and the second rung shares. When one is buying them one should be mentally prepared for another 10-15 per cent fall in those shares also.
If one is comfortable to that then one could start picking up some stocks.
You have pointed out that 3050 level is a very crucial support level, which has been breached on the Nifty. Nifty is at 3035, what would you think will bring about a rebound?
In this mayhem the only redeeming factor could be the fact that open interest positions had been reduced to quite an extent. It could have gone down to about Rs 20,000 crore (Rs 200 billion) as compared to odd Rs 55,000 crore (Rs 550 billion) around two-three weeks back. In that kind of situation, there are not too many people who would be a part of this slaughter as the lot of froth has already gone out of this system in the last week's fall.
So there will not be too many people who are too leveraged at this point in time, so that could be the only redeeming factor in the whole situation.
The kind of volumes we have seen even in the F&O space, is it a clear indication that the day traders are clearly not participating. Do you see a short build up on the Nifty right now?
The short build up is more of an arbitrage situation, which we have seen. The gap between the spot and the future is nearly 60-points, which is extraordinarily high. That would be attributed to the FII arbitrage position as well as local arbitrage. So I do not see much of a short build up in that sense.
What is the advice that you are essentially giving to your clients?
We are telling people to stay out of leveraged positions for the next month or two-three weeks. People who are into markets for more than a year, we are suggesting them to start picking up in a small quantities and be prepared for the further fall and be ready with cash to pick up it even at the lower levels.Sensex Rise and Fall: Complete Coverage
Do you want to discuss stock tips? Do you know a hot one? Join the Stock Market Investments Discussion Group
For more such reports, log on to www.moneycontrol.com
More from rediff