'Risk of Nifty breaching 7,500 quite high, bearish on Bank Nifty'

"Given the kind of sharp fall in March and rally in April, I do believe that these sharp bear market rallies do happen from time to time. There is too much pessimism on the street, not only in India but also worldwide, including the US," Gautam Shah, Founder and Chief Strategist, Goldilocks Premium Research, told CNBC-TV18.

Hence the risk of the Nifty breaching 7,500 was quite high, he said.

On the US markets, Shah said 24,700 was very important resistance level for Dow Jones. Couple of times it tried to get pass the same but it failed, he added.

Once Dow Jones breaks 24,000 on the downside, then there could be 10-15 percent fall, he said.

Gautam Shah

Founder and Chief Strategist|Goldilocks Premium Research.

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"So not only for India but also European and US markets, which all are looking quite weak from the medium perspective," Shah said.

Banks were on 10-year bull run but the fall was quite sharp in March, he said. After the decline seen in the last 10 days, there were indications that the Bank Nifty would slip back to 16,000 and or even lower.

So if one was looking for opportunities on the short side, it should be banking space, followed by some capital goods, where Goldilocks has been bearish all along, he advised.

The Nifty Auto index surged more than four percent, outperforming other indices including Nifty50.

"Auto had a good day today but I think it is a selling opportunity," he said.

"IT and FMCG are usually considered safe-haven sectors. I think there are indications of a major drop in both popular defensive sectors. If FMCG and IT were to correct from here, I don't think the market can be spared," he added.

Shah was positive on pharma and said the direction would likely remain up.

"It has come out of five-year bear market and in that bear market, it has lost 50 percent of its value. So the recovery looks good and genuine,” he said. It got little overheated and that was probably the reason for correction in the last four-five sessions. “I think every time when the Nifty sees a downtick, I think pharma will do well," he said.

"So the pharma remains our top pick and lot of stocks will see substantial upside of 25-30 percent over the next six-nine months."

The other sectors he said would do well are telecom, chemicals and insurance. "Broadly these are four pockets in the market that we like and everything else will slide," Shah said.