Yogesh Radke, head-quantative research, Edelweiss Securities sees Hexaware Technologies as a good play on back of the open offer and one can expect a 10 percent gain from a three month timeframe.
Yogesh Radke, head-quantative research, Edelweiss Securities, says Put buying has been seen at lower strikes since the implied volatility in the last couple of days has gone up significantly. One can look at straddle buying but the returns could be limited, he adds in an interview to CNBC-TV18.
He sees Hexaware Technologies as a good play on back of the open offer and one can expect a 10 percent gain from a three month timeframe.
Below is the verbatim transcript o f his interview on CNBC-TV18
Q: What is your sense about how the market is technically poised and how would you play out the volatility of the next 24 or 48 hours?
A: In the last couple of days the implied volatility has also gone up significantly, it is around 30 odd levels. On the investors’ part, they have been cautious on the Federal Open Market Committee (FOMC) meeting and Put buying has been seen on the lower strikes.
One can play the market through straddle buying but given that the implied volatility is at 30 percent, the returns maybe limited there also.
We have largely seen protection buying on the downside by the investors who are slightly cautious on this Fed event.
Q: On the back of open offer how do you play a stock like Hexaware Technologies now?
A: Since the volatility in the market is too high, you need some stocks which you can pick up which has some corporate action. So, Hexaware is a good play given that there is an open offer around Rs 135 level and given that there could be lesser participation by the investors, less funds would be opting to tender their shares, which gives an opportunity to buy these shares in the market and tender. So, we believe that the acceptance level could be around 90 percent to 100 percent, which leaves a spread of around 10 percent on the screen.
Therefore, if one is fine with the interim volatility in the stock given there would be an INR movement even Nifty movement, then in a three months timeframe one can look at a gain of 10 percent with 100 percent acceptance in the stock.
Q: What about the other theme that the market is looking for in terms of stocks that might delist - Is there any specific stock where you can take a punt?
A: The previous deadline which was given to reduce to the public shareholding to 25 percent, many of the companies opted either for delisting or did an offer for sale (OFS) and brought their shareholding below 75 percent. There are couples of companies, which are waiting for the opportunity to delist but after this guideline what has been released, there is some positive expectation that there would be some promoters who would be interested in delist their stock.
However, I think it will take some time more before you start seeing these stocks. Couple of these stocks have diluted themselves or delisted from the exchanges before June 2013 deadline. There are couples of stocks left, let us see how things shape up.
Q: What did you make of the buyback of Bayer Crop at Rs 15.80 and is there an opportunity there?
A: It is a tender offer and that is good but the acceptance levels is very low. This means the size of the buyback vis-à-vis the number people who can participate in the offer is quite huge. So it will be left by some 10-15 percent acceptance. Therefore it is not lucrative to look at it in terms of an opportunity to make some money out of it.