In an interview to CNBC-TV18, Siddharth Bhamre of Angel Broking spoke about the outlook for F&O market and his perspective on various stocks.
Below is a verbatim transcript of the interview:
Q: The weightage that Hindustan Unilever Ltd (HUL) has in the index is close to about 2.7 percent or so, what are you noticing in the F&O market and what would you recommend on the stock?
A: In our daily report, one of my analysts has given a buy call on HUL though this data was not in front of us. From F&O perspective, yesterday we saw 17 percent rise in open interest (OI), clearly formation of long positions. The observation he has stated to me is that there is huge amount of shorts which are still standing in HUL which have not been covered in yesterday's trading session despite 6-7 percent rise in prices.
There would be a gap-up opening because of this issue, probably Rs 525-530. After a gap-up opening, we still expect further upside momentum because these shorts, which are standing, would run for cover. So, those who are long in HUL should maintain long position despite a gap-up opening.
Q: What are you guys telling your clients to do with the Nifty right now?
A: We could not stopped out in our shorts between 5,650 and 5,700 and post that we have not been long in Nifty but we have been long in Nifty components be it banking or some of the infrastructure stocks or capital goods majors. We continue to do that. Unless and until we do not get a significant dip, we are not going long in Nifty.
However, the stance has changed from negative to neutral and stock specific. Reason is that firstly, we thought that foreign institutional investors (FIIs) are just covering the short positions but fag end of the last expiry and this new expiry we have seen formation of long positions in index futures and yes, cash base buying has continued. So, this has changed a bit of a perception and we would not suggest to short at current levels. A lot of people are anticipating that 5,950 to 6,000 would be a good shorting point because it is a good resistance. We would suggest not to do that.
Also implied volatility (IV) are very low, we have a very long expiry, so stay long or go fresh long and buy a Put option because Put option IVs are just in a range of 13.5-14 with 30 days left to expiry. That is what we are recommending a Put hedge at this point of time.
Q: Would you start positioning yourself on the long side if the Nifty starts the day with a small gap-up or would you wait for any dips or break beyond a point to initiate more aggressive long positions?
A: We do not have Nifty longs as of now but as I mentioned earlier, we will buy Nifty only when we get significant dip in Nifty. At the same time, FIIs inflow continues and other parameters of liquidity which we measure are supporting. Till then we are long in components of Nifty and Bank Nifty and we will stick to that strategy.
Important levels which people are talking about is 5,950-5,970 resistance. If you get a dip of around 70-80 points from those levels then we might think of going long in Nifty rather than anticipating a breakout right now and going long.
Q: You have a call on Allahabad Bank, can you take us through that?
A: Allahabad Bank has seen good formation of long positions in last series and has seen dip in the beginning of this series, discount of around 3.5-4 points in futures, it is a good buying candidate. Next week we have results of Allahabad Bank, go long in this counter with a target of Rs 144 and a stop loss of Rs 128.