In an interview to CNBC-TV18, Amit Gupta, Head- Derivatives at ICICI Direct spoke about the outlook of the F&O market and recommended various stocks.
Below is a verbatim transcript of the interview:
Q: How are you calling the rest of the April series?
A: Look at the month of February when this particular selling started. The index future selling by the foreign institutional investors (FIIs) is very important to note down. FIIs shorted that 6,000 level, market could not take out 5,950 afterwards despite two-three attempts. Then we saw the same kind of contract addition in the open interest (OI) and that happened around 5,850 and we saw that Nifty could not take out 5,750.
Now we have seen that around 5,730, the recent short build up of FIIs came up with 14-15 percent of contract addition and that time also the figure was around Rs 800-1000 crore minus. Since then we have seen 5,650-5,630 levels which will remain very stiff resistance for the market in this series. So, even if any pullback is coming, I do not see it going beyond 5,650 and we should remain short in the market.
At 5,600, yesterday also we saw how the panic with the short covering came away and then somebody sold in the market. This particular future of selling is more in cash not in futures and options (F&O) or it is not like a leverage closer because we have seen nine out of top ten Nifty stocks are sitting around 6-7 months low OI. So from where the question of leverage closure comes? It is more portfolio based selling or the simply index future shorting by the FIIs. They are also buying out-of-the-money (OTM) Puts and this is where the volatility has surged in the recent period, it has come to 17 percent and OTM buying since the starting of the series has come at 5,400 Put strike. So, I think the eventual target for the market is 5,400 and on the higher side the stiff resistance will be faced at 5,650.
Q: Some of the banks were suffering yesterday and this morning you are going short on HDFC Bank?
A: Yes, because till expiry even if market recovers, you need to look at some stocks where still relatively higher OI is left. HDFC Bank is one of those. In the last three-four months we had seen that some delivery based buying came at Rs 616 and then it has started moving up. It has again come back to these levels.
I fear that below Rs 616, we can see some delivery based selling in the stock and it can come down to Rs 570. My sense is that when it was not able to take out that 50-day moving average on the higher side, despite its attempts for the whole week, it gave up. So, you are going to see more long liquidation in the stock. It is better to go short whenever it is moving up. Rs 625-630 is the range one could pick up.
My sense is below Rs 616, the fall may aggravate. So, one can add more shorts below Rs 616 levels.