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: What did you see happening with the Bank Nifty on Friday because last week saw quite a bit of pullback on that, would you be long the Bank Nifty this morning?
A: For the Bank Nifty to do well the conviction is lacking. So it has to close above 11,800. However, if it moves and trades above those levels for around half an hour or so, you can do at the most a bull spread in Nifty where you buy the lower Call and sell a higher Call. There is still another resistance coming up at 12,000 levels. So maybe currently it is not showing that kind of conviction but on Friday positions were built to the extent of 5 percent, it went up by 1 percent but it is yet to prove. So if there is a close above 11,800 levels one can trade long in that.
Q: What did you see on Infosys in the futures market on Friday and how would you position yourself there?
A: It is a very interesting kind of a scene in Infosys. You have an overall open interest (OI) of Rs 5,300 crore, a single stock probably has never seen – I am yet to confirm that but it is fantastic.
It is very interesting that in this quarter, should Infosys not break below Rs 2,630, an upward level of probably Rs 3,400 onwards is in store for the next six months.
Q: Some of these auto stocks were under pressure last week, Mahindra and Mahindra (M&M) is down more than 6 percent, you have a trading idea on that?
A: Yes, I have a bearish trade on M&M. We did see positions being built on the shorter side around 15 percent. I am suggesting buying 880 Put, which is available at Rs 16 and selling simultaneously 840 Put, which is available at around Rs 6. So your cost for this comes to around Rs 10 and your benefit could be around Rs 30. So with 1:3 cost to benefit ratio, there is a good trade one can take on the shorter side. Those who hold this stock can also take some solace from buying this bearish trade.
Q: What is your highest conviction trading idea in the Anil Dhirubhai Ambani Group (ADAG) pack now?
A: At this point of time, the highest conviction does not lie there. But definitely Reliance Power looks slightly better placed from ADAG stocks.
I have a bullish trade where one can buy 80 Call at around Rs 2 and sell 85 Call for Rs 1. Your cost comes to Rs 1 and your maximum profit would be around Rs 4. Good cost to benefit ratio here but it is essentially for all those people who want to trade for the sake of trading. One should allow the markets to dip around 50 points or so in the Nifty and then it will make sense to convincingly construct a bulls spread in the Nifty itself.
Q: Give us a quick word on some of these realty counters and what kind of position built up you have seen on all of last week?
A: I am not tracking it but we did see positions being built in Indiabulls Real Estate on the longer side although the stock was flat.
In Unitech, shorts have happened, but there was a positive news today.
I will stay clear of that sector today.