In an interview to CNBC-TV18, Atul Badkar, VP - Institutional Equities - Derivatives Desk at Edelweiss Securities spoke about the current trend in F&O market.
Below is a verbatim transcript of the interview:
Q: How are you playing the Nifty today, would you buy into the strength or are you still looking for shorting opportunities when these bounce backs occur?a
A: If you look at the Nifty post last Thursday, real action in the open interest (OI) happened primarily on Friday and Monday and between Tuesday and Thursday. The last three trading sessions, you haven't seen the OI on the Nifty move too much. One amazing thing is that the kind of volatility that you have seen has been so sharp that all traders are being getting stopped out either ways.
Going into the result season next week, my sense is that over the next few trading sessions, you will form a range and broadly that range should be around 5,750-6,000. As of now, it looks like strong open just going by the SGX cues, but until 5,870 is convincingly crossed on a closing basis, your next resistance comes at 5,920 and eventually 5,970. Unless and until 5,970 is clearly breached on a closing basis over a few days, I do not see this market heading higher.
In the past few months we have seen 5,970 like a multiple resistant point. So if that is crossed then you can convincingly take long positions. However, if you want to trade the Nifty, if it closes above 5,875 then you can think of going long for maybe a percent or one and a half percent.
By and large, I think there is going to be a trading range of 200 points in the Nifty over the next few trading sessions.
Q: What do you think about Hindustan Unilever Ltd (HUL) and what you saw on that stock yesterday because there was some short covering but there was also quite a bit of Call writing that we saw in the HUL stock, any strategy there?
A: Whatever happened yesterday, the entire play is over. We know that it is 100 percent acceptance and a lot of people got that sense towards the close of the market. The market now anticipate Rs 600 to be some sort of a base of the stock. So whatever Call writing you saw, people have a view that it will not go above Rs 620-630 but that is a very view based trade and it is possible that in the first few minutes of trading, it will be extremely volatile and the stock can easily touch Rs 620-625. So if that were to happen then people who have written upside Calls will come in to cover their short positions.
Q: Yesterday we saw some trepidation in some of these power finance companies, you have a recommendation on Rural Electrification Corporation (REC) for the day?
A: The recommendation on REC is more on a technical level rather than anything else changing fundamentally or on OI. We saw both Power Finance Corporation (PFC) and REC being beaten down quite badly the day before yesterday and it is kind of consolidated.
On the charts Rs 196-912 level is holding quite well. It looks like we are poised to move towards Rs 212 levels. So this is purely on charts and it is a very short-term trading call however you need to have your stops in place. I would play a long with a stop loss of Rs 190.