In an interview to CNBC-TV18, Siddharth Bhamre of Angel Broking shared his outlook on the F&O market and trading strategies for various stocks.
Below is the edited transcript of Bhamre’s interview to CNBC-TV18:
Q: What would the strategy be for the day?
A: Our perspective for the market is that it is history versus liquidity which is panning out. Historically, the current set up is not good for market where one is seeing the commodity prices at high levels and interest rates coming down and how there is a direct correlation between interest rates and markets over a period of time.
At the same time, on the other hand, FIIs are relentlessly buying in cash market, index futures and fresh long formations are seen and we are seeing traces of them selling put options in Nifty that is around 5800-5900 put options. So, if we weigh these two things, then yes, history repeats itself but it never gives you an advanced warning.
Right now, we are going with the other theme which is that liquidity is strong. Though we are not very aggressively long in Nifty, but components of Nifty and other stocks where we are playing according to merit of data, we are going long or short.
We are adopting stock specific approach at these higher levels of around 6000, rather than forming aggressive long or short in Nifty. From a day’s perspective, I believe market might be flattish or slightly positive, but from positional perspective, I think it is becoming more and more difficult to form a very strong opinion on either side. So, be stock specific in this market - that’s what we are advising and that’s what we are generating trades on.
Q: Is that your position on the Bank Nifty as well or over there are you guys working with more short bias?
A: We have seen huge formation of long positions in Bank Nifty after the inflation figure came out. In anticipation, people formed long positions. They were anticipating 50 basis points rate cut. Even last monetary policy, we have observed that people have started factoring in what Reserve Bank of India (RBI) would do before what RBI does. There is a disappointment that there is only 25 basis points rate cut and the cautious stance which RBI has mentioned.
Bank Nifty right now is long heavy. It looks difficult that it would give a significantly upside move. It has a very strong positional resistance is at 12,800. It has good support around 11,900-12,000 level. So, I believe pressure would continue but don’t expect very significant crash in Bank Nifty from current levels. So, it will probably be rangebound trade if you see some of these stocks where implied volatilities (IV) have shot up, one can probably form short strangle there. In Bank Nifty, the prudent strategy for time being would be to sell 11,800 put if you sell and 12,800 call.
Q: Yesterday, the two spaces that moved well were IT and metals. From either of those spaces, would you buy anything?
A: We were long in IT and we are still suggesting to be long in TCS and that strategy is panning out well, bull call spread and now long futures too. But beyond that, in IT space we are not very optimistic. From metal space, yes we have seen good amount of short covering in beginning of this series. Now, we are seeing formation of long positions. We have picked up a safer stock over there - SAIL, which according to us has quite limited downside from current levels. It has very high dividend yields stocks at current levels.
In the last two trading sessions, a huge amount of long formation has taken place but the price action has not been that strong. Case in point, the stock yesterday saw around 10 percent built up in open interest and the price going up by approximately one percent. I think there is still substantial upside from current levels. Rs 65-66 is a good resistance. We are anticipating a breakout. We don’t expect very massive move but we are expecting a target of Rs 72. So, fix a stop somewhere around Rs 61 and go long here.
Q: Metals have not done too badly in this market. Anything that you would trade from there in your part of trade?
A: We will be going long on SAIL though not very significant upside from current levels.
Q: You have a call on L&T for the morning. Tell us about that.
A: It is not a positive call. We are expecting negative price action in L&T. The stock has a good resistance between Rs 1,580-1,600. The counter is appearing long heavy. We have seen huge built up in beginning of this series- about 20 percent, seven to eight percent in two trading sessions that is barring yesterday’s trading session. Yesterday’s price action technically is also not very encouraging. So, we are further anticipating price action on the negative side here. Go short for the target of Rs 1,465 and stop loss at Rs 1,615.
Q: Anything from the ADAG bunch that we were discussing that stands out in your market?
A: Not really. We are seeing huge formation of long positions in Reliance Capital and Reliance Infra also. But this is something which is out of our purview in terms of analysing the data because it is very news prone. Some of the other stocks which we are liking is India Cement. It is on the verge of breakout. The stock saw strong price actions in last two trading sessions with good volumes and we are expecting substantial upside from current levels in India Cement. Though, it’s a less liquid stock in F&O, you can buy in cash market segment.