May 03, 2013 01:12 PM IST | Source: CNBC-TV18

Nifty heading to 6050, start booking profits: ICICI Direct

In an interview to CNBC-TV18, Amit Gupta of ICICI Direct shared his outlook on the market.

In an interview to CNBC-TV18, Amit Gupta of ICICI Direct shared his outlook on the market.

Below is a verbatim transcript of the interview:

Q: How are you looking at the next few days of the May series now that we have reached 6,000 on the Nifty?

A: In my last interaction, I had mentioned how the Foreign Institutional Investors (FIIs) have slowly started closing their short positions in index futures.

They have not rolled the positions into the May series, which is a big positive at least for this month and the critical levels where they had formed the shorts were 6,050, 5,850 and 5,730 starting from the February series. 5,730-5,850 were already taken out. That is why we formed a view last time that till Nifty does not close below 5,850, we should remain positive in the market.

On the higher side, 6,050 was the target. We are coming closer to this target. One should start booking profits at least in the Nifty positions. If we are closing above 6,050 then we need to wait for a couple of closings and then 6,190 in Nifty can also be achieved.

Today we have the monetary policy, 25 bps is already discounted at certain extent. If we see certain kind of profit booking then 5,850-6,050 may be the range for one-two weeks.

During this, the stock futures are going to outperform. If you look at stock futures open interest (OI) right now, overall it is very low. If you compare it with last three-four months, we are sitting at a very low OI in the stock futures. So, there is ample room for the fresh positions to start getting build up. People may start forming some kind of a leverage and they can make some short-term money also in the month of May.

We should remain positive stock specific. One can factor in Nifty options, 5,900 Call has the highest build up right now and Nifty is trading at 6,000. That means whomsoever rolls the short positions in 5,900 Call option, they are stuck up. So, on declines you are going to find support around 5,900-5,850 levels.

Q: You have a buy call on Reliance Industries Ltd (RIL) for the day, tell us about that?

A: Banks have already outperformed. Now if we see any kind of profit booking in the banking space and market has to remain here then it is possible that the other index heavyweights may start participating.

In the last session, we saw RIL started moving up and it closed above Rs 800 levels. If you look at the Call options, Rs 820-840 Call options were heavily sold in the last series and this stock was not able to move beyond these levels. We also saw some closure of short positions at Rs 820 Call. That means there is some up leg may be seen in the stock in the coming sessions.

Another thing is that in the last series despite market coming down, at 760 Put we saw that somebody shorted that with around 3,000 contract in the beginning of the April series and let it expire and it did not come below Rs 760 despite two-three attempts. So, whomsoever try to go short in the stock and finally rolled the position in anticipation that this level maybe taken out, they have all got stuck up, there is a good scenario and the carpet has laid down for this stock to see some kind of short covering and move towards another 30-40 points up.

Q: What kind of position build up are you seeing on the rate sensitives going into the policy, the banks, even autos and real estate, are their significant long positions standing?

A: Definitely yes. If you look at the auto pack particularly in last session we saw good amount of positions were built up. In Mahindra and Mahindra (M&M) and Tata Motors also we saw the additions were coming.

If you look at the previous rollovers, we have seen that the positions are still intact in the private banking to a certain extent. Yes, we had seen the closures before but again the additions have come around these levels like HDFC Bank whenever it is falling around Rs 660-680 range, you are seeing the additions coming up. State Bank of India (SBI) around Rs 2,220-2,240 we are seeing the additions are coming up. These are the good support levels for the banking stocks.

If you look at Bank Nifty, whenever it is coming closer to 12,500-12,550 we are seeing the additions are coming up. I will take these critical points as a good support for the banking heavyweights or the banking index and if they are coming below this then we will start unwinding our long positions in them. Otherwise, it is possible market may remain in a sort of range and these may start participating or if the largecaps remain here then the midcaps in bits and pieces may start up participating.

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