Book profits if mkts open with gap up on Wed: Gujral

Technical Analyst Ashwani Gujral said beyond a knee-jerk reaction the market will not look at politics very seriously.  He feels investors should book profits, if there is a gap-up on Wednesday.

"Even if one gets a gap up post event, if it is just a scrape through, then people would come in and sell because this event has been hanging over the market for a long time, and four-days of sharp rallies, probably discounts everything. The markets ignored the drought angle, so everything does not look as rosy. The market will have slow rallies punctuated by downsides as well. If one gets a gap up on Wednesday, one should book profits."

Excerpts from CNBC-TV18’s exclusive interview with Ashwani Gujral:

Q: How would you approach this next 48 hours from a trader’s perspective?

A: The sharp rally in the past three days is probably because investors believe the UPA would scrape through. If the UPA can get above 290 seats it is a comfortable victory, then politics can take it higher. We are in a range between 3,800 and 4,200. We are at the higher end of the range. The market may correct after this and probably re-test the 4,000 levels before heading back up. We are in an intermediate uptrend. If 4,200 is convincingly crossed, then we could head up to 4,600. This entire move is a pullback rally, which will finally restart the bear market downside.

Q: There are a lot of speculations on this, but if indeed the vote passes and one gets a gap up on Wednesday morning, would you book into that or would you book profits ahead of the event tomorrow afternoon?

A: Even if one gets a gap up post event, i.e. if the government manages to scrape through, then people would come in and sell, because this event has been hanging over the market for a long time, and four-days of sharp rallies probably discounts everything. The markets ignored the drought angle, so everything does not look as rosy. The market will have slow rallies punctuated by downsides as well. If one gets a gap up on Wednesday morning, one should book profits.

Q: If there is some disappointing news and the market actually comes off a lot, would you look at that as an opportunity to start accumulating a bit or do you think the short-term trend which we have got in place is still up?

A: Even if the government fails to hang on, the market is probably not going to breakdown below 3,800-3,850. We may come down to that 3,850-3,900 levels, but we will start rallying back up again, because even if the government makes it, elections will be held around March-April. If they don’t make it, elections will have to be held at around October-November. So, it is just a matter of three-months. Either way, beyond a knee-jerk, the market will not look at politics very seriously.

Q: What's happening with some of these midcap banking stocks? They seem to have bounced the hardest in these past 3-4 days of a run up that we have had.

A: There has been a lot of short covering and obviously the stocks that get beaten up the most come back the hardest. Bank of India could probably head back up to Rs 320-325. The smaller banks could have 25-30% kind of rallies. Once the market senses that there is support for the Sensex and Nifty at around 12,500 and 3,800-3,850 respectively, the midcaps will start running. Banking stocks are safe bets for a trading rally.