Nifty may fall to 5600, rupee seen at 65/dollar: Sharekhan

The 50-share Nifty benchmark slipped below its 200-day moving average for the first time in four months on Tuesday. The Nifty has fallen around 350 points over the last seven sessions and with key supports broken, traders expect further downside in markets.

Somil Mehta of Sharekhan told NDTV that Nifty could fall to as much as 5,600 over the next month tracking weakness across global markets and currencies. He expects the rupee to slip to 65 per dollar mark.

"Weak sentiments are coming from Dow and other Asian indices. Market momentum is on the downside. If 5,600 is not sustained, markets can fall to 5,200-5,300 levels," Mr Mehta said.

He added that global markets are likely to correct further and the Dow Jones average can fall another 5-6 per cent in the very short term.

Trading strategy:

Short Nifty with a target of 5,600 and a stop loss of 6,100. Buy puts of around 6,000 and 5,900 and hold on to next expiry. Bank Nifty has not seen a bounce despite sharp correction and can fall to 9,200 in the short term.

Blue chips like Reliance Industries, ONGC, L&T, Maruti Suzuki, Hero MotoCorp and Tata Motors have started cracking.  Realty, infra and banking will witness the biggest selling pressure and are perfect candidates for going short, he added. Punjab National Bank and IRB Infra are good names to go short.  

What stocks to sell?

PNB: Sell with a target of 484-470.
IRB Infra: Sell with a target of 65-60.
Tata Motors: Sell with a target of 280-270 and a stop loss of 360.
Bajaj Auto: Expect 10-12 per cent cuts.