Anticipating a slight role reversal between S&P500 and Nifty: Jai Bala

ET Now: When we spoke last, you said the S&P500 fall of 150 points was just the start and we will have more such days. Was yesterday one such day on the US markets?

Jai Bala: That is correct but I would like to point out that the S&P is relatively stronger than the Nifty at the moment. The Nifty has been outperforming the markets between February and May and that outperformance might be coming to an end and there could be a slight reversal of roles. S&P might hold up the May lows but go close to it. Nifty might break it and go slightly below. I am anticipating a slight role reversal at the moment.

ET Now: The Nifty is showing relative strength. Why is it looking like it may break the recent lows?

Jai Bala: When we spoke in the middle of May, I had pointed out that banks are going to outperform the Nifty and in the next leg, it will be the banks that will be the reason for the fall. Today we are seeing a little bit of weakness and in fact some of the key pivotals within the banking sector breaking down like

.

Kotak should not have gone below Rs 1.840, it has gone below that and a stock like

is tantalisingly close to significant support at about Rs 600. If it closes below Rs 600, it is a weekly breakdown. So, we are seeing some significant price action on the negative side for the banking sector and banking sector has always been one of the significant reasons for market outperforming or underperforming.
There is some negative price action coming through for the banking sector and most importantly, the infrastructure stocks are coming to important support levels. The Nifty Infra Index, has important components like Reliance, Adani Ports and Bharti and that will drag the market lower; 4,700 on the Nifty Infrastructure is a very important level for me and the March low for Nifty Infra was a corrective low that completed. If 4,700 were to give in, that will say the correction is going to prolong and it is going to get a little bit deeper somewhere close to 4,400, maybe even 4,000 for Nifty Infrastructure.

As I said earlier, the three important pivots of this bull run have been Adani stocks. One of that is Adani Ports and that has actually come off from Rs 920 in a trending decline, Adani Ports went higher post a corrective bounce somewhere close to Rs 750.

If Reliance were to print Rs 2,656, that points out the recent bounce is actually a corrective bounce and it can go back to the recent lows. It touched Rs 2,300 and that is the reason I am having this thesis for the moment.