Ahead of the expiry on Thursday, Amit Gupta, Head of Derivatives at ICICI Direct is holding the 5,050 level as very critical. In an interview with CNBC-TV18, Gupta said, taking the 50-day and 200 day moving average, Nifty has not closed below that level in the last couple of days. Hence, he is looking at that level, going long on oversold stocks which are continuously seeing upsides and coming into the limelight. Gupta is also hopeful of 5,350 levels in the next series.
Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.
Q: Where do you expect expiry this Thursday, ballpark?
A: I think if you look at the current status, it seems that it is a more stock specific moment. Just scaling the Nifty levels may not be easy to find because if you look at what has happened during the month, when the month is full of events generally we have seen that volatility increases and the short vega players enter the market. What they do is, they sell the call and put options.
In this series we have continuously seen that the call and put options are getting sold. The vega has come down and we are approaching expiry. I believe that most of the premiums have been taken out by these players. What may happen in this particular four day session is the unwinding of these positions. That will lead to more volatility.
In fact, if you look at the positions in the future segment, the rollovers for the next month are already getting added up. But the current month positions are still intact. The closure of these positions will also induce a lot of volatility in the market.
If you look at a specific level, I think 5,050 remains very critical, you have a 50-day moving average there, you have the 200 day moving average close to that and we haven't closed below 5,050 in the last couple of weeks.
So till we are holding that, I think that the oversold stocks could be the story to play out with. We can go long on those stocks because continuously we are seeing stocks which were not there in the limelight coming into the limelight. We are seeing 5-7% upmoves coming up. I would try to find out the stocks which are quite oversold and remain long till those levels on the downside ahead.
Q: HCL Tech has had a weakish patch, you would still remain short there?
But, in the last four-five months, a distribution was happening in HCL Tech above Rs 470 levels. It hasn’t closed below Rs 470 but, now when the market is slightly better, it is trying to breach those levels also. I think that is a weak sign and if it is going below Rs 470, we should utilize these moves to go short and on the downside I think Rs 455-450 levels can also be tested.
Q: Any thoughts amongst the traders in terms of what kind of range the market may hold in the next series because the run up has seen very high volume and activity in your market?
A: I think if you look at the July options positions right now, it is mostly near the money positions we are seeing. Otherwise in the put options, the market has seen 45-46 puts getting added in terms of open interest. I think once we are out of this range, 5,000-5,200 will have the possibility of a much better market direction because above 4,200, we are heading towards 5,350, no doubt about this.
It is a very critical level and before the monetary policy we were easily heading upwards and then afterwards, we made a top around 5,190. I think once this level is taken out in the index, then you will have more short covering lined up because as I mentioned before, there are enough number of positions especially in the short side, which are going into the next series. The current month is still intact.
What may happen now is that even if we are not breaking down in the coming four sessions in the month of July again, you will see the round of short covering coming up. I think on the downside, 5,000 is important. When the market moved up from 4,900-5,000, that was the first sign of cash buying in the market.
So far the neckline is at 5,000. Till we are not breaching that, positionally we may not say that the market is weak. On the contrary, I think above 5,200, immediately is very much possible. You may have another round of short covering.