In an interview to CNBC-TV18 Siddharth Bhamre of Angel Broking shared outlook on the Futures and Options segment and stocks across various sectors.
Below is the verbatim transcrpt of his interview on CNBC-TV18
Q: Now that the March series behind us, what are the levels that you would be watching out for the April series in terms of range for the Nifty and what would you be recommending to investors then?
A: We are not looking at any levels as such because most of the time foreign institutional investors (FIIs), stronger hands of the market have been buying Puts. You look for the range when people are selling Put options in big way and that is how you find support.
The support levels that people were talking about for March series, around 5,900 or 5,800 Puts has a lot of built up but that has gone for toss because these Put Options were bought.
Similarly, with implied volatility (IVs) at such lower levels and with the entire April series yet to go by, we are not seeing any selling happening in Put Options by stronger hands but in fact, Call selling is happening.
So despite people talking about that Put selling and Put buying has happened, the Put-Call ratio (PCR) is below 1 even for the April series on a standalone basis.
This clearly shows that stronger hands are writing Call Options and they are not expecting a significant bounce back. So, this is a sell on rise kind of market.
One more indication that has been strongly working for us since quite sometime in the upward journey of the markets and as well as now in a fall is how euro is behaving to the dollar. People were talking about whether this 200 day moving average (DMA) would hold for Nifty or not? If you look at one year chart of Nifty and euro, you will see a very strong direct correlation with euro being a lead indicator. Euro has already gone below its 200 DMA. We believe this market is heading down but I am not sure of the levels, we may take support at 5,500 or below.
However, resistances are there in place. We believe now 5,750 and 5,800 this 50 point zone would be a good resistance for the market. If at all it is a bounce, which happens in this market from positional perspective, around that level of 5,750-5,800 you should short this market.
Especially from expiry perspective, today lot of people are talking about how market may go up because of net asset value (NAV) would be popped up, fund managers are working on it but these are all bull market concepts. For instance when one is sitting on a 10-15 percent gain on the fund and they want to have more incentives, they pull the markets up. But if we think about the funds that have given positive returns today, then there are hardly any funds. So then who is going to pop up the NAV? I believe this is complete misconception by market.
I believe this market is sell on rise, look at the euro, the way things are happening, it may go down to 1.25 levels and Nifty correspondingly may follow the suit.
Q: Any last minute trading idea that you are going to give us on individual names?
A: We have been negative on private sector banks and we have initiated quite few shorting strategies in HDFC Bank, Axis Bank and the Bank Nifty itself. Those positional trades would be valid for today also.
Tata Motors is one stock where we have seen good amount of shorting taking place and the bounce, which happened on March 26, was mainly because of short covering. That is one space where you can initiate fresh shorts again.
If we look the metal stocks today, Tata Steel, Hindalco Industries, Sterlite Industries (India) one wonders why they are going up despite euro coming down? Because One can understand if euro appreciates the base metal prices go up. However, today despite euro not appreciating, these stocks do not warrant any upside move.
So these can be stocks where you can probably initiate shorts at higher levels. You may not get profit today itself but certainly maybe on Monday, you might see these stocks opening in red. These can be few trades which one can open up today and probably carry forward for the next trading session.
Q: Defensives have had quite a solid series even maybe IT to that extent so the likes of Hindustan Unilever Ltd (HUL), ITC and maybe even HCL Technologies has gained around 7 percent, what will your strategy be going into the April series on defensives?
A: They were very good buys when market was at around 5,950 when the bounce came from 5,700 to 5,950, where we initiated some longs.
In IT, the buying is mainly happening because it is defensive in nature. So, there would be a point in time when market would correct and along with market, you would have defensives also correct. Initially, when there is correction people try to hide. People want to be in equity but they want to hide in defensive.
There would be a point in this market in April series where you would see that defensives also correcting along with the high beta space though the correction may not be very intense, so I will not be going long defensive now.
Ultimately, I want to initiate a trade in market and that trade should be on the main side of the trend. The main side and the maximum marketcap is going down. So, I would initiate short trades in those high beta stocks rather than finding long trades in so-called defensives, which have already moved 10-12 percent from the lower levels. So, I will not initiate any fresh long at least.