In an interview to CNBC-TV18, Siddharth Bhamre of Angel Broking shared his outlook on the F&O market.
Below is a verbatim transcript of the interview:
Q: How are you telling your clients to trade now after yesterday’s set back?
A: We are tellling our clients not to panic and not to form extreme negative views. Yesterday's price action was very strong. It has been seen since yesterday afternoon that it has forced a lot of people to change their views from bullish to bearish.
However, we are not falling into that camp. First and foremost, the observation is that after one year, we had such a big fall and we had volumes in cash market less than average. We had volume in futures and options (F&O) segment more or less, what we would see on any other flat day or probably day when market just goes up by 25-30 odd points.
If you look at options data, maximum built up yesterday was seen in 6,000 Call option and that was 27,000 contracts, which is not huge comparable to the price action which has taken place. There is no significant unwinding, which has taken place in Put options. In fact, some unwinding was seen in 6,000-5,900 but it is not worth mentioning also.
Foreign institutional investors (FIIs) continue to buy in cash market segments. More important than that, no shorting in index futures, no significant unwinding in index futures. So yes, price action has been strong, it has breached some support levels, has forced a lot of people to change their view but other factors are not supporting to change view. We continue to remain stock specific and we would suggest not to panic in this market and initiate aggressive short positions.
Also, one more factor which is pointing that not to panic is where the Put options implied volatilities (IV) are, they are not increasing, in fact they have decreased slightly which is very unusual in a fall especially the quantum of fall which we saw yesterday. So not to panic is what we are advising and continue to be stock specific with a long or short.
A: If you look at DLF, a lot of short positions have been formed ever since stock started correcting from more than Rs 250 levels. Right now, the stock is around Rs 232. It has a good support between Rs 225 and Rs 230. If market stabilises or bounces, which is quite likely according to us from derivates perspective, you might see some short covering bounce in this space especially DLF. Even if that doesn’t happen and if market doesn’t go up and stock corrects, it breaches its support which people are highlighting in DLF.
On the other hand, we have seen that Indiabulls real estate has run up from Rs 55 to Rs 75 mainly because of short covering and then we saw some built up happening between Rs 75-80. Yesterday’s fall in Indiabulls Real Estate is backed by strong volumes in cash markets segment and significant unwinding in F&O segment. This suggests that if market continues to move down or flat, Indiabulls Real Estate may underperform.
Hence, we are generating a pair trade by buying DLF and selling Indiabulls Real Estate at current market price.
Q: You have a short trade on Titan Industries for the day?
A: Titan Industries has bounced back mainly in fag end of April series because of short covering because gold prices were crashing and then there was a bounce in gold prices. Now, again we have seen fall in gold prices and yesterday we have seen huge amount of cash based selling in Titan Industries, it is light in terms of open interest (OI) so there is more room for formation of short positions. So I would suggest to short Titan Industries at current levels with a target of Rs 265 and stop loss of Rs 293.