In an interview to CNBC-TV18, Hemant Thukral, National Head-Derivative Desk at Aditya Birla Money, shared his reading of the market and outlook on various stocks.
Below is a verbatim transcript:
Q: Not a great close to the index last week, how are you approaching things from your part of the market today?
A: If we look at few important data points on the derivative front, the way the 5,700 Puts have the highest open interest (OI) when the Nifty is around 5,700, clearly suggests that it is already being hedged. Now, the point is that people are expecting a correction and that is why a lot of people have bought Puts very aggressively. People are expecting at least 5,550 because after 5,700, the next level of Put which is active is 5,500.
We have always seen historically that market does not obliges when it is overhedged. I think 5,650-5,630 should act as a support level for Nifty and we might see a small rebound coming till 5,800-5,850 from those levels.
Having said that, at higher levels around 5,900, there is huge Call writing initiated already and Friday it got intensified. I just see that in this range of 5,630 to 5,850 we may see some more consolidation in coming one week time at least. For us, the strategy is that, we can make a short strangle, sell 5,600 Put and 5,900 Call, which is giving a total premium of Rs 75 to Rs 80. So, a huge range traders can play 5,520 to 5,980. For next one week people should adopt this strategy.
Q: Tech Mahindra was up about 6 percent last week but you think it is good for more, you have got a long going on that one?
A: If you see Friday’s data point, on weekly basis also, the stock has added very good amount of OI. Friday itself we saw 34 percent addition in OI.
For a stock like Tech Mahindra, this is a huge OI being added up because it is not a trading stock usually but now it again made a 52 week high. The cost has moved up clearly telling that next level, which we are expecting, is Rs 1,125. The traders have to maintain a stop loss, so I will maintain a stop loss of around Rs 1,040 from where it has given a breakout. IT stocks will continue to outperform seeing the current market conditions.