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The dismal IIP numbers dealt a body blow to the markets. Strong global cues helped the markets get off to a flying start, but once the weak economic data came in, the indices cracked. The Nifty closed at 4,872 up 6 points, while the Sensex shut shop at 16,128 up 5 points.

Anil Manghnani of Modern Shares & Stock Brokers said he would be a bit more cautious in trying to find the bottom in this market and would rather wait for a bottom to emerge.

Excerpts of CNBC-TV18’s exclusive interview with Anil Manghnani:

Q: What would you takeaway from the past few days of green and how would you trade now if you had to take a position on the Nifty?

A: I’m probably still sitting on a sidelines, on this one. No doubt that most markets on Monday, which definitely throws out the decoupling theory, touched the January lows including the Sensex, the S&P 500, the Nikkei and Straits Times too came very close to it. All have bounced from those levels, which is expected. When you hit such a major level or retest a major level definitely the first test of it should see an upside bounce.

But going forward, I think I am going to wait and watch this time because I know the last four years, you have seen this major bull market where markets hit a particular level and bounce and you have this V-shaped recovery. But this time the indicators are slightly different from the past occasions. I mentioned the 50-weekly, we hadn’t closed below that in four-years and we did that last week. If you take the major bottoms of the last four years 8799 and 4227, those two levels were never retested. After the market went up, maybe it did a 60% correction of the first upmove from 4227 or even 8799. They never actually went and retested 8799 or 4227.

Having said that, the fact that we retested 15,332 on Monday, and with the break of the 50-weekly for the first time in four-years, it’s telling me something different. It’s telling me at least this time it’s a little different situation then we have had in the past four years. So maybe you need to pay attention to why these things have happened today that has never happened in the past.

Having said that again, I think now, since this is happened I will be a little more cautious in trying to find the bottom, and rather wait for a bottom to emerge or wait on the corresponding bounce suppose bounce. Suppose that 15332 is to be a bottom, wait for the corresponding bounce to show enough strength.

Where would I be a little more convinced, I think on the Nifty two important levels 4908-4967, this is the 50-week simple exponential. If you take the simple 200 DMA is 5060-5090. So anywhere from 4900-5100 is a very important resistance zone for the Nifty. Correspondingly, the Sensex’s 50-weekly simple and exponential is anywhere between 16,600-16,800 and we did exactly about 16683 today on the Sensex.

So again on the top, that 50-weekly is proving to be resistance for the Sensex which was a support over the last four-years. So I want to see these levels cross decisively and sustained before I go out and make a call that well 15332 has been retested so a double bottom has been made.

Here’s how he views the stocks on board:

On Cairn India and Unitech
Like I said earlier the fact that Unitech broke below January lows much before the Sensex actually retested on Monday, it was a weak sign altogether. It did bounce closer to Rs 256, I think Rs 263 was where it bounced from, but on the upside, Rs 320 is a major resistance, which its where it’s falling from today. So till Rs 320 is not taken out, I would just say it was a technical bounce which was due and it might go back and retest the Rs 260-250 lows. So wait for Rs 320 if you are going to take a fresh call at this point or then buy lower.

Cairn is an interesting stock maybe because of the oil prices at an all-time high and some of these oil stocks are doing very well. That stock is not too far from it’s all-time high which does say something for it in such a market. Rs 256, is the immediate resistance with Rs 268 being the all-time high.

So I think it’s already moved up quite significantly and although there is lot of strength, I will probably wait now between Rs 256-268 to see when the real selling pressure or profit booking emerges.

On Banking Stocks
Probably if I am trading banking, although the sectorial charts have taken a hit there is still strength that’s why you see good trading bounces, but I will stick with PSU. I think there is too much uncertainty in the private banking. Before the bankex actually broke, ICICI Bank was already breaking on subprime news, Kotak was already breaking on rumours of a possible major hit in their proprietary trading or the trading desk as a whole. I think that news is also out that is going to remain in the system for sometime, I don’t think people are going to forget that news that far. So if you getting bounces in private banking, definitely take your profits and run and wait for the corresponding fall again. But in PSU banking, you can still trade on the long side.

On Metals:
I would not say metals is a defensive sector, but it is behaving like one in the last two weeks of trade. Whenever the markets have been under immense pressure, along with FMCG, auto, maybe IT sometimes or pharma, the metal pack has held out. The real reason is not the defensive part, it is pretty much the commodities that are trading at such high levels.

When you look at the commodity charts, although they are quite strong, they are way overbought. I think maybe some of the people looking at the charts could be looking at a short-term dip in commodity prices, purely because they are so overbought and that is the reason why you are seeing some of the selling in SAIL or some of the other metal packs. I think it is pretty much because the commodity is probably overheated.

You have to be honest and say that these stocks have corrected nowhere in comparison to some of the other blue-chip in the last two-three weeks. Most of the blue-chips have actually tested the January lows and gone much below then whereas these stocks are way above their January lows. So they are pretty much adjusting for that.

Also, once the IIP numbers came out people had to offset somewhere. So I think you would go and sell some of the good stocks that at least you are sitting on some profits over the last two-three weeks. That is why you are seeing many of these commodity stocks coming down now.

On Fertilizers:
I thought pretty much after the Budget it was a given that these stocks would struggle and then more or less move with the rest of the midcap stocks or when the Sensex and Nifty had a good day, they will have a good day or fall vice versa. So I am a little surprised with today’s move.

If we are talking purely levels, the fall from the high of the Budget day to a couple of days back, that retracement level for Chambal gets over around Rs 58. So I think if it can cross Rs 58, then you can expect it to retest the highs of the Budget day which was closer to Rs 69-70.

For Nagarjuna Fertilizers, that number is around Rs 50 levels. So I think you will have to watch out for Rs 50. If it can cross Rs 50 then logically it can retest Rs 59 and Rs 57 which was the high on the Budget day. But I am little surprised on today’s move definitely.

On Cipla, Ranbaxy, Sun Pharma:
Sun Pharma I do not track but Cipla has pretty much retested the bottom of three-four months back at Rs 160 on the carnage day of January 22. The fact that the market has retested that level on the Sensex, this stock did not go anywhere close to Rs 160. It is very similar as the sugar pack, which confirms the bottom has been made and retested. So now it is definitely a positive stock moving forward. Rs 210-213 is the immediate resistance, if it can cross that then Rs 220-230 levels also are possible. But a more slower moving stock still a lot of base building and a lot of work is going on the volume front.

The stock that I really think has taken off is Ranbaxy. Unfortunately, over the last year we have been saying that this stock has bottomed out another Rs 350 mark. So I was a little surprised that it took so long to finally break out. But now, I think it is in absolutely fresh breakout move making new highs on a regular basis in a market that is actually struggling. This does say a lot for the stock. Rs 469-470 is where it touched today, that is the resistance, but I think once it takes out that it is heading towards about Rs 516.

On Sail and Tata Steel
Like I said, I think pretty much because they held out through this last two-weeks of fall, and even with the markets retesting their lows on Monday, the stocks are still way off their January lows. So they are pretty much adjusting for that and I think they need to correct just in line with the rest of the market. The time has come where commodities are a bit overheated and you would see a cooling off, or at least a profit booking in the next couple of weeks. That’s why it is reflected in the local prices also.

Disclosure: It is safe to assume that my clients & I may have an interest in the stocks/sectors discussed.