In an interview to CNBC-TV18, Siddharth Bhamre of Angel Broking spoke about the current trend in F&O market.
Below is a verbatim transcript of the interview:
Q: How are you playing the Nifty this morning?
A: Last week we mentioned that around 5,900 there is a good shorting opportunity because the way foreign institutional investors (FIIs) bought on expiry day and the day after, it did not continue for long. It was clearly a sign that the liquidity, which they poured in for a couple of days, may not continue and this significant rise, from sub-5,700 to 5,900 in no time, probably would fizzle out. We continue with that view.
However, FIIs are still shying away from forming long positions or buying in equity markets cash segment. In fact, they have been selling in bits and pieces. Yesterday, we saw good amount of unwinding in index futures positions, which was more of long unwinding by FIIs. We saw fall in Nifty open interest (OI) as well as fall in FIIs index futures OI. It is clearly suggesting that they are squaring off their long positions. So we are not optimistic on the market.
We believe that for some time to come, market maybe in a range where 5,900-5,950 would be a good resistance and you would find some support around 5,700-5,680. It may not be a very major support. For time being we have initiated strategy of short strangle 5,700 and 5,900.
One thing that is adding more and more weightage to our view is the built up in 5,400 Put option. Since last three trading sessions on daily basis this option is adding around 15,000 to 20,000 OI in terms of contracts on daily basis and FIIs are buyers in index options, which clearly suggests that these guys might be buying. We will not give a view stating that market is going towards 5,400 unless and until 5,700 is breached.
So for time being, range bound market, slightly negative bias, if you see index around 5,900-5,950, short it. Around 5,700 do not go long in index but have stock specific long positions. That is what we are doing and advising to our clients.
Q: Public sector banks have been completely walloped over the last few weeks and the Bank Nifty has been under pressure, how are you approaching the bank index and largecap names like State Bank of India (SBI) there?
A: There also we have slight negative biasness towards the index because you are seeing the private sector names, which have large weightage in the index showing formation of short positions. However, as I was mentioning that within this range we would be stock specific though the view is negatively biased, there would be some stocks where we would see some positive fillip.
Now look at the public sector undertaking (PSU) banks, huge amount of shorting has taken place, be it SBI, Punjab National Bank (PNB), Bank of Baroda (BoB) and other midcap names which we have discussed. In yesterday's session we have seen good amount of buying in cash market segment from lower levels.
At the same time, we are expecting some kind of short covering in SBI. We are not expecting very big targets or a turnaround in SBI and we are not saying that this is the bottom for the SBI but Rs 1,850 is a very good and strong support levels. You are trading somewhere around Rs 1,880 at this point of time. One can go long at current levels. This would take the stock probably Rs 100 up, not beyond that. So fix a stop loss somewhere around Rs 1,835 and go long.
Q: You have got a trading strategy on Infosys as well today?
A: Infosys has given more than 15 percent gyration in last two quarterly results. Implied volatility (IV) at that point of time was around sometimes 35, sometimes 50, it has not gone beyond 54-55. In last six quarterly results, prices have not corrected beyond 15-20 percent and at the same time, the minimum move was 5 percent move. IVs have gone to 72 percent. This is way too high. I believe markets are expecting too much of volatility, which may not happen.
Last time a lot of people have burnt their hands in short strangle, this time people are not doing that but still there is a lot of buying of options, which is happening. So we are taking a contra-view. We are selling 2,200 Put and we are selling 2,700 Call. We are getting Rs 110 to Rs 120 premium. So even if Infosys move up or down by 14-15 percent, you will not reach a breakeven point. We are not expecting 14-15 percent move in this quarter and hence we are aggressively suggesting this short strangle to our clients. IVs are 70, those are unsustainable levels, quite high.