In an interview to CNBC-TV18, VK Sharma of HDFC Securities spoke about the outlook for the F&O market.
Below is a verbatim transcript of the interview:
Q: From a trading perspective how would you position yourself in the first few days of the August series?
A: We will have to wait and watch but if I have to take a view today based upon how the markets have progressed in the last series, my sense is that the Bank Nifty where a lot of Puts have been written around 10,500 levels that is a key level to watch. If that breaks, although the Bank Nifty has fallen around 5 percent in the past series, it can further go down. That level needs to be watched.
For somebody who wants to take a bearish position, buying 10,500 Put whenever the level breaks would be a good idea and one should always make a bear spread. In terms of Nifty, although the largest amount of positions are around 6,000 level, we have seen that the Puts, which are being written at around 5,900 have gradually shifted lower. So the market is telling us that it is probably going to go low down from here.
I would start building bearish positions in the Nifty in case we were to see a close below 5,870.
Q: What kind of activity did you see on the big fast moving consumer goods (FMCG) spaces that we were just discussing though, Hindustan Unilever Ltd (HUL) ahead of its numbers and ITC in reaction to its numbers?
A: Investors would be looking to buy the 360 Call, which is available at Rs 12 and also create a bull spread here so that you can cap your gains at around Rs 380 levels. That 380 Call was available at around Rs 4. So your cost would come to something around Rs 8 and you can hope to make Rs 12 in this. Although these stocks have run up, I still believe that investors have a lot to gain and they can lose a lot less because of the fact that the monsoons are being good and these are the sectors that will continue to act as a strong shelter as banks gets weakened.
Q: You have got some banks within that Bank Nifty call. IndusInd Bank has suffered quite a bit, how would you trade that?
A: It has not fallen as much as Yes Bank and positions were built in IndusInd Bank slightly on the longer side yesterday. The chances of the stock going up are less and going down are much more. However, if the Nifty were to open and these banks were to slightly open on the positive side in the morning, I would go out and buy 420 Put in this stock. It quoted at around Rs 22 so if one can get it around Rs 15, it will be a good bet. One can keep a stop loss at Rs 10 and hope to make it Rs 25. Those investors who hold this stock, they will do very well to buy this Put and hold on to the current series and not book their profits in the Puts.
Q: The quiet outperformer has been the telecom trio, Bharti Airtel, Reliance Communications and Idea Cellular, within that you have a trading call on Idea this morning?
A: When Idea broke out last month, I said this is a stock, which will make a new high. It eventually did. It still continues to be a good bet but you cannot buy all stocks at the current market price. So although positions have been built here, investors or traders can look at buying the 165 Call, which close at around Rs 6, Rs 4 in case you get an opportunity. In case you do not get an opportunity, let it pass. But if you do get an opportunity, you can hope to sell it around Rs 8, keep a stop loss at Rs 2 in this.
A: We have seen positions being built only to the extent of 4 percent but the stock went down by almost 11 percent. So, there is some kind of recovery, which happened yesterday but I do not think that recovery will go far unless the decision is reversed. So, assuming that the decision will not be reversed, it continues to be a sell on rally stock.