See Nifty support at 3800-3850 levels: E Mathew

E Mathew of Mathew Easow Fiscal Services believes that the Nifty might dip below 4000 levels today. He said that the Asian cues will push the Nifty.

He sees Nifty support at 3800-3850. According to him, the crude charts are critically poised and a deeper correction is possible there. He feels that if crude breaks USD 138 per barrel, a rally might be seen in the Indian markets.

Excerpts from CNBC-TV18’s exclusive interview with E Mathew:

Q: It seems like the market will struggle around that 4,000 mark again today, would you watch for the lows we have made earlier or do you think there is support before that?

A: We may drift below 4,000, yesterday Reliance contributed to the downfall in the index. The early morning cues of what is happening in Asia will certainly push the Nifty down but we have got significant support at round about 3,800-3,850 zone. I would therefore not attempt aggressive shorting at lower levels. The immediate term cues would also be determined by the crude charts. The crude charts are now critically poised, if we break that USD 138-140 per barrel zone then we could see a deeper correction in crude and as our markets are inversely correlated to crude we will definitely see some sort of rally if crude breaks USD 138 per barrel.

Reliance Industries is looking weak on the charts and it is important that Reliance does not break that Rs 1,950-1,960 zone because if it does so that could put additional pressure on the Nifty and once again we could see the Nifty possibly drifting to that 3,850 zone.

Q: What are the sugar charts telling you now?

A: Couple of weeks back also, I had said that I am not too bullish on this sector apart from a Renuka Sugars which was looking healthy. I am not too bullish though a section of the market is suddenly turning bullish in sugar. If you look at something like a Bajaj Hindustan , we have got very good support at Rs 161-166. If the two market leaders that is Bajaj Hindustan and Balrampur Chini show a nice breakout and a pattern of higher bottoms and higher tops, it would be good news for the sector.

For Bajaj Hindustan, the first signal is that it is really breaking out and would be a continued sustenance above Rs 166-167. It will be a slow movement upto that Rs 180-185 zone. We need to give a little more time to the sugar stocks. They are still in the process of consolidation and to really label them as outperformers, we need to give them time.

Q: What do you think about Deccan Aviation, which was looking sharp yesterday?

A: It is quite surprising actually when you consider it and there is this critical support between Rs 71 and Rs 74. If in today’s market especially in a choppy market like this if it is somehow able to sustain above Rs 74, we could look at a target of Rs 86 to Rs 89 also. I wonder how this stock would be able to sustain above Rs 74 and more importantly whether it would even reach those chartical targets of Rs 86-89.

Q: What would you do now at just above 3,900? Would you be brave enough to initiate a long or just wait and watch for a bit now before doing something on the long side?

A: I would buy at the money calls right now because the premiums are reasonable now and you have got to keep a stoploss on the spot Nifty. That is the problem, the stoploss is not really 3,800, real support for the Nifty is actually between 3,700 and 3,800. So if you can keep some sort of a stoploss or you are willing to sacrifice your call premium, go ahead and buy at the money call or possibly even slightly out of the money call; something like 4,000-4,100 calls. That strategy would pay a rich dividend in the days to come at least as far as this series is concerned.