Atul Badkar, VP (Institutional Equities), Derivatives Desk, Edelweiss Securities expects 5,675 to remain as a strong Nifty resistance today. “We may play between 5,600 and 5,700 for few days but broadly this settlement should be in the trading range of 5,450 and 5,650,” he says in an interview to CNBC-TV18.
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He believes if the market sustains 5,600 level and above, then the Nifty is likely to go 50 points more.
Below is the verbatim transcript of Atul Badkar’s interview on CNBC-TV18.
Q: What are the chances that this market might even cross the 5750 mark? How are the Puts and Calls placed?
A: On Thursday, it was mostly short covering and that is why the open interest was down in most of the stocks. We have seen price in largecap names go up 10-15 percent and even 20 percent in some of them. The move yesterday was not just surprising but it was a bit overdone.
From hereon, we will get a strong open as the SGX Nifty is signaling but 5,675 is the 50 percent retracement of the down move from May to August and that will certainly act as a strong resistance. Eventually, even if this will continue going higher, 5,835, the 200-day moving average (DMA) will act as a next resistance.
At least today 5,675 will certainly remain a strong resistance, we may play between 5,600 and 5,700 for few days but broadly this settlement should be in trading range of 5,450 and 5,650. In terms of Options, you have seen the entire move on strikes, so 5,300-5,200 and 5,000 remain the highest open interest on the Puts, which is somewhere around 4 million shares and 3 million shares each and on the Call, its 5,700-5,800 and 5,900.
The options data does not suggest much. It will be moving inline with the market. The implied volatility (IV) did come off a bit but they are still elevated and the volatility will continue for a while longer. You need to see how the market opens and if it sustains 5,600 and higher, then you have another 50 points to go.
Q: What did you notice yesterday in the banking space? Was it purely short covering or did we see some genuine long positions getting accumulated in names like Yes Bank? Which ones would you bet on now if this pullback continues?
A: Across banking at least in the largecaps you have seen short covering. The short covering was a bit overdone. In some of the midcap banking names we saw few genuine long build-ups as far as open interests are concerned.
Going forward, ICICI Bank, Axis Bank after the kind of moves they have given, I think immediately in the short-term you can get 4-5 percent here but amongst the largecap names, State Bank of India (SBI) is one stock, which we think not just on charts but seeing how it has behaved on its patterns, on the open interest. From Rs 1,630-1,640 you can get another 8-10 percent maybe even close to Rs 1,700. So, that is the only largecap bank that we would be betting on immediately.
By and large, I do not think you want to take any fresh longs on banks from where we are today and that doesn’t mean that you will not see more upside. There will be some follow-up buying that will continue today but that will be short-lived.
Q: Are you saying that as we get to 5100, we are reaching the bottom on the index? Are you eyeing more specific sectors or stocks? If the later is the case which ones are you eyeing?
A: Investors tend to get slightly hallucinated by looking at index. If you look at the last five years in India, India’s market cap has actually moved down from USD 1.8 trillion to less than USD 1 trillion as of now but the index is down only 13 percent.
Despite the index being down 13 percent from peak, the value of the market is down by 50 percent. So, it is important to look at what businesses and stocks to invest in rather than just the market because markets may not really be in the right trend to look at right now.
You are getting opportunities in business that is exciting and that is what investors would do well to bet on for instance there are certain names that we have liked and some names that we have started to like now.
United Spirits is a stock which I have been a big fan of and it is potentially the next Hindustan Unilever of the liquor space so I am still very bullish there. I would be fairly bullish on businesses that are consolidating so someone like Bharti Airtel, Idea Cellular where the telecom space is getting consolidated, fairly looks exciting right now.
There are global plays because globally things look lot bitter than what is there right now. So, lot of the technology businesses, Infosys but also lot of mid-tier technology names could have a significant upside attached to them, Pharma businesses like Dr Reddys Laboratories, Cipla, Ipca Laboratories look fairly exciting right now. Some of the infrastructure proxies like IRB Infrastructure and PTC these are interesting names to look at as of now.
There is no trend in the market so, if you still want to play the market, you have to be extremely bottoms up and extremely sure about certain businesses. Some of these names provide that sort of a platform for investors to look forward to. So, the survivors will be really the winners from here on and these are clearly the survivors of the businesses today.