In an interview to CNBC-TV18 Siddharth Bhamre of Angel Broking shared his reading and outlook on the futures and options market. He expects the Nifty to inch higher in the January series.
"If FIIs had so much concern about fiscal cliff they would not have been buying so much in the cash market. So, positionally we are bullish. In the first half of January, we will see good upside momentum in market," he added.
Meanwhile, he sees the December series expiring at around 5,910-5,920 levels.
Below is the edited transcript of Bhamre’s interview with CNBC-TV18
Q: What is the sense that you are getting about expiry today? How you would approach the series that comes up?
A: We have not seen much of action by Foreign Institutional Investors (FIIs) the in F&O segment. Though there has been cash based buying in last 5-6 trading sessions and throughout the month they have been buying in the cash market, but F&O activity has been quite lull. How do you assess what these guys are doing? At the end of November series, last two-three trading sessions and first one week of December series, there has been huge formation of long positions by FIIs. At that point of time, we had seen Nifty jumping from 5,600 levels to 5,940 odd.
This clearly indicated that FIIs formed long position and then throughout the month they didn’t do anything. Now we are seeing rollovers in Nifty are quite good despite lack of activity throughout the month, which indicates that those long positions formed by FIIs in October and November got rolled over in December. Without forming any fresh long positions in December, these guys are rolling their positions in January series. So, the undertone is bullish.
In the cash market segment, FIIs are buying, domestic institutional investor (DIIs) are selling. DIIs are selling not because mutual fund managers or insurance fund managers are bearish, but because they are getting redemptions. This indicates that equity is shifting hands from weaker hands to stronger hands. In such kind of scenario, one should not be bearish on the market.
The third point is the fiscal cliff. On the Street, more than New Year party people are talking about fiscal cliff. This indicates it is too much spoken about and probably might be non-event. If FIIs had so much concern about fiscal cliff they would not have been buying so much in the cash market. So, positionally we are bullish. We are expecting Nifty to go higher in month of January and in the first half of January, we will see good upside momentum in market.
From today’s trading session perspective, be ready for a boring expiry. In the last two days there has been significant upside in market and because of that lot of people might have bought 5900 Call Option at higher prices of Rs 25-30 odd where we have booked profit, because initial part of the week we bought that Call Option. I believe expiry should not be above 5,910-5,920 odd levels. I am not expecting the markets to go significantly above those. I expect last half an hour also will be boring. There will not be any stock specific activity also.
Also, if one looks at the rollovers in few stocks, it justifies our bullish view on them. The rollovers in HUL, HCL Tech, Dr. Reddy’s have been very less compared to what we have seen. I usually consider FMCG, pharma and IT as defensive sectors. IT is the new defensive. If rollovers in these stocks are less then that means people who are long in these stocks are not confident enough to rollover their positions because they do not want to be in defensive and they are expecting market to be up.
Even from rollover stock specific data, we are seeing long positions in high beta space and low rollover in some of the defensive space, which indicates that this market is heading higher.
Q: When we started the December series there was a lot of optimism that maybe we could see 6000 on the Nifty this time around, but it turned out to be quite consolidatory in nature. What are the preliminary indications for the January series? Do you think that since you have a bullish view the levels on the Nifty could actually possibly reach 6000 or maybe even sustain that?
A: Though market has not gone anywhere, but that is not a bad option after run up which we had seen in past few months. At the same time, the highlight of this series was accumulation by FIIs. With the kind of accumulation FIIs are doing, it is quite possible that in January they would start pulling market up by forming long positions in Futures segment.
Slowly and steadily I am accumulating in the cash market and not doing any activity in F&O. In January without doing much activity in cash market just by pulling Futures market, one can make sure that holdings which are accumulated in December go up.
We are pretty optimistic at least in first half of January series till the time rate does not decreases, interest rate do not start decreasing we are optimistic on market. The levels which we were anticipating in beginning of December series were 6,050-6,100, that may now happen in January.