“We are headed to 7,700, if it does not hold, you should revise your target downwards… The risk of 1,000-point drop in Nifty and retest of Budget lows is possible,” Mr Kedia told NDTV Profit.
The current cautious bearish short trade should become a thumping call if 7,700 breaks, he added.
Mr Kedia highlighted that equity markets across the globe are moving very differently – Japan’s Nikkei continues to be in strong downtrend, while the S&P 500 in the US is struggling near all-time high, forming multiple false breakouts and bull traps. China is in a persistent downtrend, followed by sideways movement, he added.
There is no evidence that the dollar index should come under a strong downtrend and the fear trade in gold has played out in the short term, Mr Kedia said.
“I maintain the long term view that gold will break $2,000 before breaking $1,000, but for the time being, this rally from $1,200 to $1,300 has expired,” he said.
Mr Kedia also cautioned investors against strategies that are based on co-relations across asset classes.
“Across various asset classes, correlation is poor. Each asset class is doing its own thing. It’s a trading market over month or so with a downward bias in equities,” he added.
Banks: Mr Kedia expects the Nifty Bank to head towards 12,500 over next quarter or so. Much clearer and larger short positions are forming in PSU banks, while private banks are making reversals, so investors should book profits and get out of these stocks, he added.
Mr Kedia expects 20-25 per cent correction in auto stocks.
IT stocks are not giving buy signal, while pharma stocks continue to be in a downtrend, he said. The cement sector is also not looking good, he added.
Mr Kedia said Reliance Industries continues to look weak, so investors should go short in the stock.
The only Nifty stocks that can give a 10-15 per cent pop areBHEL, Bharti Airtel and Idea Cellular, he said.
Mr Kedia advised investors to book profits in refiners such asBPCL and HPCL and buy ONGC for long term.