Laurence Balanco, Asian Technical Research, CLSA Tech said that 20,000 is a key level to watch out for on the Sensex and that there may be a breakthrough reports CNBC-TV18. In case of a breakthrough, Balanco said the Sensex could see a gain of another 1,500 points and the Nifty could be seen at 6,600 levels. He added that the Sensex needs to hold above 20,000 in order to see any follow-up buying.
Balanco said that there is a lot of good news from the Fed already and added that global equity markets are likely to see a year-end rally.
Excerpts from CNBC-TV18’s exclusive interview with Laurence Balanco:
Q: We have come to 20,000 again on the Sensex. Do you think it’s good for a breakout this time?
A: You are looking at it again. About two weeks ago, it was testing the bottom end of the range. We made it to the top end of the range. Yesterday’s action was quite disappointing. At the start, we gapped up. At the end of the day, we saw some selling coming through. So the key level to watch on the Sensex is just about the 20,000 levels.
I do expect the Sensex to actually break through that 20,000 level and then it is the key to hold above that to see the follow-through buying.
Q: At this point are you already confirming a breakout or do you want to see it close above that 20,000 and 6,000, respectively on the Sensex and Nifty to confirm that for you?
A: From a technical side, do you want to see a close above that level! You want to see the breakout to happen with good expanding volume. That will give you confirmation that you have seen a successful breakout. I can’t call a breakout before it happens and volumes are quite the key to confirm the breakout.
Q: If indeed a breakout is affected in the next few sessions, what’s the Sensex good for in its next leg, you think?
A: I think you would look for at least a 1,500 points gain on the Sensex. If you look at the Nifty, that will put it around the 6,600 mark. So you are looking at about another 10% gain on those two indices.
Q: There has been some amount of debate on what will lead this market higher. I don’t know if you track specific stocks; but just as pockets of strength what do you think is going to bolster us?
A: If one is looking at indices, then heavyweight stocks would be what one would expect to push them higher. Reliance Energy looks interesting. Some of the banking stocks have consolidated and found supports. Some of them are making new 52-week high. So there seems to be quite a bit of interest particularly in the banking side and some of the big industrial players.
Q: There has been some pullback in the Dow Jones index as well and some of the other Asian markets. What are those technicals suggesting? Are they good for some more rallies in the near-term?
A: I think for Hang Seng in particular, we are targeting the October highs as a level to look at, just around the 32,000 mark. Korea has done quite nicely; it's sitting in a resistance zone right now. Taiwan has been quite disappointing. In Malaysia, we have seen a breakout to new highs and we actually think that index can make a high of about 1,500-1,514; that would be an upside target there. So there is strength across the region. We are looking at Hong Kong and Malaysia reaching new highs.
Q: At this point though when you look at the entire emerging market universe and even some of these Asian markets, which one is looking strongest to you?
A: If we see a breakout in India, we will see that it continues to lead the way. The Hang Seng does look quite interesting that continues to get quite a bit of flow. At the end of the day, I think what we have seen is a stable US mark.You have seen the gearing effect in the emerging markets and they have moved higher.
Q: You think global equities are probably having a good chance of year-end rally even from here?
A: I think so. We got the Fed meeting next week and we see the breakout happen before the Fed meeting. So probably a lot of good news will be priced in and also on confirmation that we get news out of the Fed. Then we will probably see a consolidation. December so far has been a positive month.
Q: Last time we talked about the currency picture as well. How is that figure looking, the yen to the dollar. Which one is now looking stronger now technically?
A: We are looking at a recovery in a dollar index to about 77-78; it did test the following 50-day moving average last night and felt that the level is probably looking at the set-up on momentum indicators. We could see the dollar rebound to around 77-78 level. It’s currently sitting around 76 on that index.
For yen-dollar, we are looking at an improvement to about 111-112 level and that should be supportive to equity markets.
Source: Moneycontrol.com
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