In an interview to CNBC-TV18, Siddharth Bhamre of Angel Broking spoke about the outlook for the F&O market.
Below is a verbatim transcript of the interview:
Q: How are you approaching the Nifty now?
A: In this fall of 6,100 to 5,700 we have not gone short. At the same time, the biasness had remained positive. It is a pleasant surprise to see markets going up.
Foreign institutional investors (FIIs) did short, from June 7 till now, around Rs 3,000 crore of index futures but open interest (OI) for Rs 3,000 crore of shorting has gone up by around 45 percent. That means it is not just shorting. At lower levels we have seen a blend of short and long both.
At the same time, if you look at the cash market segment barring two big days of selling, there has not been significant selling in cash market segment. So, you should be negative on this market kind of data has still not yet come in front of us.
At the same time, some of our technical advisors are pointing out that on charts, Nifty and Sensex have made some sort of island reversal pattern, which is good. I am taking some inputs from there. However, I am not rip-roaring bullish which these people are talking about that immediately in the current series itself you might see more than 6,000 levels.
We are taking cues from implied volatility. Yesterday after the event, market has gone up by 41 points, we have seen implied volatility slightly inching up. That is not a very encouraging sign to go aggressive long. So we are anticipating that this market would probably remain in a range - till this expiry – where you would see 5,950 that has acted as good support before may act as resistance and the lows formed recently around 5,680 would be a support. You still have implied volatility of 19-19.5.
It is a good time and after long time we are suggesting a strategy of forming a short strangle of current series where you sell 5,900 Call and you sell 5,700 Put. We got somewhere around Rs 75 premium. You can wait for next four-five days and we are expecting this premium to shrink to Rs 25-20. That kind of strategy we are adopting for June series but come July, we are not seeing anything negative in this market which would lead to substantial correction.
Q: From the banks, you have a trade on State Bank of India (SBI) today?
A: We are taking cues from Bank Nifty also. Unlike Nifty where implied volatility has gone slightly up, IVs in Bank Nifty has come down, which augurs well for the continuation of that index going higher.
Yes, we do like private sector banks but at this point of time from F&O if you see SBI, it has good amount of short positions. However, in recent corrections, which happened before three trading sessions, we did not see huge pile up of short positions and the stock was taking good support around that Rs 2,000-2,020 levels. It is kind of a long-term support for the stock. SBI has bounced from those levels. We are seeing some signs of formation of long position. So one can continue to hold on to long positions if you have formed it. If you get a dip of half a percent to one percent, you can form a long position and trade with positive bias with a stop loss of Rs 2,015 and a target of Rs 2,200.
Q: You have got a trading call on Tata Steel as well?
A: Tata Steel has breached its support at Rs 295 and before that only we were seeing huge formation of short positions though we did not anticipate that stock would breach the support. Rs 260-250 is a good range where stock could take support and it did and it has bounced back slightly from those levels. There are a lot of short positions, euro appreciating against dollar, which is generally good for commodities. We are expecting short covering rally in Tata Steel. So at dips one can buy or even for current levels. Not a very big target price though, I am expecting a bounce back till Rs 290-300 levels, fix stop loss somewhere around Rs 268 and go long over here.