70% chance of mkt breaking Jan lows: CLSA

Laurence Balanco of CLSA said he is looking at a 70% probability of market breaking January lows. He expects another 10% downside from the August lows.

Excerpts from CNBC-TV18’s exclusive interview with Laurence Balanco:

Q: How is the Nifty chart looking right now is it looking in slightly better shape than January or still looking fragile?

A: It is still vulnerable to further downside. What we have seen is a bit of a consolidation develop. What has been disappointing is that with regional indices rallying from their March lows, really Indian markets being the Nifty and Sensex have gone up, in a ranging pattern that moved sideways. So the risk here is that we break below the January lows and move down to August 2007 low and that is our base case at this point in time. Sitting just above support, but disappointing action that we have seen so far.

Q: How much probability would you attach to that event of the Nifty going to its August lows of sub-4,000?

A: It is our preferred roadmap that we are looking at for that as far as trying to give it a percentage. We think there is a 70% probability that we’ll see a break of the January lows and then a test of the August lows. We would expect a good consolidation and some ranging around the August lows or to build the platform or at least a foundation to try and build up a rally from there. But recent action has been disappointing.

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