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Girish Nadkarni, ED-Capital Markets of Avendus Advisors NSE Media Centre and Mitesh Thakkar, VP - Private Client Group of Edelweiss believe markets will trade with an upward bias in the following few days.

Nadkarni said the market is likely to be rangebound with a positive bias in the near-term. It has taken negatives in its stride and so will trade with an upward bias.

While Thakkar believes one can expect to see selling after bouncebacks. He said 5,310 is an important technical level, followed by 5,410 and then 5,480 would be a stretch target.

Excerpts fom CNBC-TV18's exclusive interview with Girish Nadkarni and Mitesh Thakkar:

Q: How are you feeling about what this month might throw up? When we stepped into the week there was skepticism and by the time we have wrapped it up there is strength on the screen?

Nadkarni: I think a large part of the strength essentially stems from the fact that the markets have been beaten down very quickly this month and there has been some amount of short covering in this last week. Having said that, the belief is that valuations of stocks have reached fairly interesting levels. Therefore while markets are likely to be rangebound on account of mixed news coming out, in the next couple of weeks, markets will trade with an upward bias largely because of the valuations being good and bouts of short covering at points of time. Also a lot of the negative news has already discounted by the markets. So unless there is some serious new negative news that comes out, I think inflation, high oil prices, high commodity prices issues, the market has already taken in its stride. So I guess the markets would trade tend to trade with a slightly upward bias.

Q: What did you make of this week’s performance and do you think some of it was because of the short covering cushion we had or is the market genuinely showing you trading momentum towards the upside?

Thakkar: This was a very important week as far as technicals are concerned. We had a good rally before last week’s decline wherein the markets went up from 4,700 to 5,300 on the upside and last week we saw good profit booking happening. This week also we started on a negative note. The markets were not very strong on Monday and we did see some selling happening on Wednesday again, but the important part was that the support of 4,950 held on very well and on Thursday and today we saw a very good trading upside, which occurred in the indices. The good part of this rally was that a lot of trading stocks - the stocks which I would call as flavour stocks, the breadth improved to a very big extent. A lot of stocks like fertiliser and sugar, sectoral flavours have come back into the market and that is the very important part. With last two days' moves behind us, we can definitely look towards some more kind of upside left in this market.

Q: The target that has been talked about now is 5,300 - is that what you would watch for as well on the Nifty?

Thakkar: What has happened is that when the indices fell after the decline in January, we saw a lot of bouncebacks and a lot of intermediate peaks being recorded. So I think that one of the prominent fixtures of this upmove would be that we would see a lot of selling coming in from various technical levels or various peaks, which have been recorded as a result of the bounceback. So yes, 5,310 is an important technical level, followed by 5,410 and then we are looking at 5,480 as the stretch target.

Q: Oil and gas was a big performer through today’s session, how are you feeling about that entire pocket with specific reference to the only one standalone E&P play we have?

Nadkarni: I think with respect to E&P companies it is a goldmine except that for ONGC the subsidies are really a cause of concern and with the price of oil going up the subsidy bill keeps mounting for ONGC as well as the refining companies, since the burden is passed on. I would think that it is difficult times for all these companies although they have gone up today, especially the refining companies. I think unless there is certainty on how the subsidy bill is going to be shared by the government in terms of bonds, I would think of staying out. However, what is bad for the refining companies would be good for E&P companies. There is one company in the private sector Cairn Energy, which is doing very well. It is also a good time for ancillary companies, which feed off the E&P sector and those are companies that one should look at when the oil prices are high and likely to remain firm.

Q: Anything from there that you like technically?

Thakkar: There was a lot of action in the oil sector this week and Cairn has been enjoying very good momentum. We have been slightly positive on the stock, because it made a new high, so technically that’s a good breakout and the price targets are yet to be achieved. We are looking at an upside of around Rs 318 to Rs 320 on the stock - that’s a good stock. ONGC in fact was the dampener this week. We saw good declines happening on Monday, Tuesday and Wednesday. Rs 930 to Rs 910 is a good support range so I would advice to cover up the short side, but there is still no cue for people to start taking long positions over there.

Q: Would you watch the whole rate sensitive area more carefully from hereon?

Nadkarni: I would think so. I don’t agree that this week’s inflation has come as more of a shock. The analysis in terms of weekly data tends to be very volatile. But we have tested some of these numbers in our research and we find that if you actually compare the inflation rates over a three-year period and look at the inflation this week over the inflation three years back and plot that graph, it has a very stable, steady growth upwards. Some of these inflation numbers therefore can be predicted to remain in a fairly narrow band of between 4-6% when you compare a three-year CAGR.

Therefore, we expect there will be bouts of volatility in the weekly inflation rates and numbers that keep coming because these are CAGRs over a one-year period. If one were to look at it over a three-year period, our expectation is that inflation will continue in that band, if you see this weekly volatility continuing for the next couple of months. So, inflation is an area that will remain and play out over the next three-four months.

While inflation may look very bad from a market and industry over a medium-term perspective, with respect to market movements, it does not always happen that bouts of high inflation are followed by declining markets. It has its impact on interest rate sensitive sectors like autos or two-wheelers and things like that. But for the rest of the market, where it is not so critically dependent on the interest rate, you may not necessarily see a bad market, following the weekly numbers that keep throwing up on the inflation side.

Markets have after four-five weeks reckoned that inflation is going to stay and are kind of resigned to the fact that this will be an issue over the next couple of months.

Q: There is a big run of strength for the metals: Hindalco and Nalco are up 14-15% for the week. Does it look like a temporary bounce or would you trade some of these?

Thakkar: No, the metals are very attractive. The aluminium pack looks very good. Nalco is very close to its previous high of Rs 528-530 and that is where some supply can come in.

But if you were to look at a slightly longer-term picture, they look very good. In fact, Hindalco has had a very good breakout during the week on the weekly charts and giving a very strong closing.

The aluminium chart looks strong. So, these commodity driven stocks, particularly Nalco and Hindalco, are in the middle of a good uptrend. Over the next few weeks, we see good appreciation in the prices of these stocks. Even SAIL, after declaring its results today, gave a very strong move and we are seeing a lot of supply come in on these stocks at price levels around Rs 185-187.

So, I am looking at 10% more upside in SAIL, at least on a trading basis, and we will then take it from there.

Q: Many analysts are putting these gains down to what the global markets have been doing and the fact that we have more or less been mirroring global strength. How likely are the chances that we go back to test the March lows or get even close to that figure?

Thakkar: It is a very important question. Whenever a rally starts, the technical angle to look at these kind of upmoves would be that you are having some kind of bounceback. That is how we started this entire upmove from 4,600-4,700 levels. You are looking at a target of around 5,200-5,300, which we have reasonably achieved.

If this week we would have broken below 4,950, I would have bet strongly on the shorts and expected that this decline, that started the previous week, would have continued and probably in a much more severe manner.

We are still not sure on the longer-term charts that we are out of this entire declining mode. But with strong upmoves, temporary relief is there and we still see some kind of upside left in the markets.

But in the long-term, we are still not sure and my sense is that we might come back after a period of time and if not test, at least go very close to those levels.

Q: While inflation has been working at 7.5% for many weeks now, what came in a bit of a rush was the weakness for the rupee. Do you think that took the equity market by surprise?

Nadkarni: I would think so. I don’t think anybody expected this weakness in the rupee to happen so soon. In almost two-three weeks or probably less than that, we have seen almost 5-6% decline in the rupee. This has taken most people by surprise including the industry.

It is also reflected in some of the valuations of IT stocks. They have got some amount of breather because of sentiment that the earnings will look up on the back of a falling rupee.

Q: What sort of targets are you working with both on the upper and lower side for the Nifty for next week?

Thakkar: The upside targets remain 5,310 and 5,300 is a critical supply over here. If we are able to move above that, 5,410-5,420 is under the supply area. On the stretch side, we are looking at 5,480 as the technical target. On the downside, we probably will need to close below 5,000. 4,950 emerges as a big support range. There are going to be weekly averages being positioned over there. So, as long as we are above them, on a daily closing basis, we will keep bouncing back.

Q: A couple of large sized IPOs have got the go-ahead as well. Do you think the primary market is going to start opening up over the next few weeks?

Nadkarni: The sentiment is a little positive in the markets. If markets break the 18,000-18,500 levels and there is a rush of buying that happens, one will see the first of the IPOs or the big IPOs coming into the markets.

At this stage there doesn’t seem to be any significant change in the sentiment towards primary issues. But the markets have been trading in this band of 17,500-17,600 on the up and about 15,500 on the low side. It necessarily needs to break this trading band which may or may not happen in the next 1-2 months. Therefore, the issue of the new paper is critically dependent on market sentiment.

When that improves significantly, one will see the issue of new paper from some of these companies.

Source: Moneycontrol.com