In an interview to CNBC-TV18, VK Sharma of HDFC Securities shared his outlook on the F&O market.
Below is a verbatim transcript of the interview:
Q: Steady pile up of short in your part of the market, how are you guys approaching trade in the near-term and what kind of levels are traders talking about?
A: Let us put things in perspective first. We have had quantitative easing (QE) then we have had QE2 then we have had QE3. What makes anyone believe that the decision, which Ben Bernanke has taken to start easing, will not be reversed. So, that is something that will come up for discussion in the coming days and that will be the reason why the markets will ultimately rally.
For the moment, we are taking cognizance of what is happening all around and we are getting the best signals from the bond market. Seven countries all over the world had to cancel their bond auctions primarily because the yields had gone high. This is something, which is not happening in the normal course of things.
The leverage in the US in the equity market is the highest that we have ever seen and around USD 15 billion of margin calls could come. A lot of debt is forming a part of these securities, which have been given. So any rise in yields could trigger a collapse of the equity markets as well.
So, currently whatever is happening, we have never seen this happening. Therefore we have to approach the market with a piece of mind and use any rally to lighten commitments -- as far as this settlement is concerned -- and buy 5,600 Put on the Nifty to be on the safer side.
Q: What would you do with some of the IT faces now, any long positions that are building up over there?
A: I have not had a look at these IT stocks neither we want to go long at this point of time in these stocks because if at all the market is going to recover, the recovery is going to happen in all those stocks where people have gone short. That will be in the banking or the infrastructure space.
The second thing is that, you are not so sure about these IT companies to what extent they have hedged their positions. So, it could even come as a surprise. Within this sector Tata Consultancy Services (TCS) and Infosys are the ones, which we have earlier recommended and these are the ones we will buy. Since falling market can trash all stocks and sectors, we will use the dips but not buy immediately.