Laurence Balanco, Asian Technical Research, CLSA, says 4,650-4,700 are key support levels for the Nifty. At 10.53 am, the index was trading down 58.05 points, or 1.19%, at 4,809.20. He feels a breach of 4,700 will lead to further losses and sees 4,000 as the next support in case the level is breached.
According to him, long-term investors can enter at 4,000-4,300 levels.
Here is a verbatim transcript of the exclusive interview with Laurence Balanco on CNBC-TV18. Also watch the accompanying video.
Q: Where do you see significant support for the Nifty?
A: The old break out area, which is down at the 4,700- 4650 area, is the key support area in the short-term. What you see over the past three months is the Nifty was making new highs, the Sensex making new highs, but you had this momentum divergence, where momentum indicators weren’t confirming those new highs and that created the vulnerability. And a sell off in global markets over the past week has seen the short-term levels give way and now it’s really set up for test of 4,700 area, which includes a 200-day moving average (DMA), a break below that level does open a way for further losses then.
Q: One level, that is being talked about over here, for the Nifty is 4,500, is that the level you would watch if the index slides significantly lower from here?
A: If we break through the 4,700 level that really does open the way and the next significant support level is actually down towards 4,000 that is what we are really watching. There are some short-term levels in-between that, but if you are looking at the big macro numbers, 4,700 is the next and below that we are really talking about 4,000, around that mark is the next macro level of significance to watch.
Q: What are the Asian markets suggesting because many of them seem to have come back to 200 DMA and sort of paused there, do you see a major decisive breach of those levels for many of the key Asian markets?
A: It is quite interesting; in such a short space of time markets have given a lot of the gains that we saw early in the year. Literally in three days, the S&P 500 retraced what it had gained over a three month period. And if you look at the Asian markets, the China and the Hong Kong markets are back at their 200 DMA where they are finding some short-term support.
So looking at the Asian markets, looking at Taiwan and for instance we are short-term support levels, and potentially we see some kind of oversold rally. But with some key levels giving way, we probably still have more downside in the coming months.