In an interview to CNBC-TV18, Amit Trivedi, Co-Founder of Investworks.in spoke about the outlook for the F&O market.
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Below is the verbatim transcript of his interview on CNBC-TV18
Q: What is your call on the Nifty now?
A: We are looking at two scenarios. One, due to the currency volatility that we are experiencing, foreign institutional investors (FIIs) are kind of go slow on India. If that happens, we are predominantly linked to domestic factors that are neutral to negative. Hence we maybe quite volatile and the range can go slightly lower from hereon.
Second, if you look at the last year-to-date (YTD) data, we have outperformed the emerging market (EM) index by around 5 percent and if that continues the range which was till now around 5,500 to 6,000-5,900 kind of levels that should hold on.
We will come to know that only in the next few days but the high volatility that we are experiencing should continue for the next few days or in the next week but should subside at least in the second half of August.
Q: How are you approaching the banking space, any strategies there?
A: Traders were executing simple trades like long pharmaceutical, long IT, short banks. We think those trades are becoming more crowded now. The risk reward is not in favour of going short in banks at this point of time. Therefore, going and trading in options could also be slightly risky at this point of time.
One can look at some kind of pairs. If you look at IndusInd Bank versus ICICI Bank, one can enter into that ratio trade which is buy IndusInd Bank, sell ICICI Bank. The ratio is at around 2.31 right now. This can go down to around 2.2 for a target per se. You can place a stop loss at 2.36 in this particular strategy.
Q: Why do you have a call on Bharti Airtel today?
A: Bharti Airtel is predominantly in a range of around Rs 310 on the lower side and Rs 340 on the higher side for the last few days. This stock should consolidate and marginally move up from hereon. So one can enter into a ladder strategy in Bharti Airtel, which is buy 330 Calls, sell one Call of 340 and one Call of 350. There is a cash inflow of around half a rupees in this strategy which is Rs 500 on a lot and if Bharti Airtel indeed goes up, you will make money, your maximum profit will be around Rs 10 if Bharti Airtel goes anywhere between Rs 340 and Rs 350. Losses will start above Rs 360 in this particular strategy.
A: It is one space that is still protected especially the private sector ones like RIL. The stock is at around Rs 860, it should consolidate at these levels and the downside seems to be protected around maximum Rs 830 levels.
One can go and sell Puts of RIL for the August series. You are getting around Rs 5, the implied volatility (IV) is at around 31 percent, it should come down to around 26 percent and that should help in this selling strategy. So one will make profit in the strategy if the stock remains any value above Rs 800 which is close to around 8 percent from current prices.
Q: You have a pair strategy today in the banking space, can you take us through that?
A: IndusInd Bank could be bought because the fall has been quite sharp compared to what ICICI Bank has witnessed. One can buy IndusInd Bank and sell ICICI Bank for the next few days.
We think the outperformance in IndusInd Bank would be higher than in ICICI Bank.
Those kind of strategies we feel one can do at this point of time given the way markets have become very choppy and just one directional trade could be quite risky in nature.