In an interview on CNBC-TV18, Siddharth Bhamre of Angel Broking talks about the F&O market. In the futures market, the implied volatility for Call and Put Options indicates that this market bounce may not sustain for long, he said.
Bhamre is expecting around 150-200 points correction in the Nifty from current level to 5720. So, he advices short-term traders to go short in Nifty at 5900-5920 and keep a stop loss at around 5980.
Bhamre says to go short on SBI at Rs 2050-2100 as it would be a very strong resistance zone. He feels Canara Bank can correct significantly from current levels. He advices to short at current levels, as there will probably be a 5-6 percent downside in this stock and also in other names like UCO Bank, Bank of India and Bank of Baroda.
Bhamre expects long positions built up in Reliance Industries, and is very optimistic on this stock. He doesn’t see significant corrections and asks investors to keep buying at lower levels.
Below is the verbatim transcript of Siddharth Bhamre’s interview on CNBC-TV18
Q: What is the call on the Nifty after the last couple of days and the big rally?
A: We were anticipating close below 5700 and that day we mentioned that probably market may bounce and may face some resistance around 5750-5800, but the Foreign Institutional Investors (FIIs) buying and the gap up opening compelled us not to short around 5800 levels. Now it is very important to see what has happened in the last two trading sessions. It is very clear that FIIs were buying. In cash market segment that day significant buying happened, but yesterday we have not seen any meaningful buying.
Second thing, Rs 1600 crore of index Futures gone long, but the open interest increased by 21-22 percent. I understand the base was low because we started new series on very less open interest, but still 21 percent rise in open interest only for Rs 16000 crore of positions is way too much, suggesting that it is a combination of long and short. Yesterday’s data hardly had any net buy sell figure in index Futures, but open interest going up by 11 percent. So again here it is a blend of long and short.
If you look at the implied volatility (IV) despite the markets going up, IV has gone up. IV’s for Call Options are around 16.5 levels, for Put Option it is somewhere around 19.8-20 levels. So your combined IV is around 18 levels. This clearly indicates that this bounce may not sustain for a very long time. That doesn’t mean we will have a crash like situation. What we are anticipating that probably 5950 to 6000 would be a good resistance point now. We are seeing a lot of Call writing happening around 6000 levels. We are seeing Put buying happening at 5800 levels. So we would suggest for a short-term trader to go short in Nifty at current levels of around 5900-5920 and keep a stop loss of around 5980. We are expecting around 150-200 points correction from current levels till 5720 levels. So shorting Nifty at current levels that is the punt we are taking right now on market.
Q: If you have taken a strategy to short Nifty, in terms of individual stocks from the heavyweight pocket, what stocks would you advice shorting because yesterday we saw plenty of action be it from Reliance Industries, Larsen and Toubro (L&T), State Bank of India (SBI), etc?
A: When market was around 5650, it was easier to take stock specific calls and we were confused about the index that what is happening. Many a times you are confident or you know more about the index, but you don't know which stocks would contribute towards it. What I believe is that the high beta stocks from infrastructure space, from capital goods space which have bounced back more on short covering and we have not seen huge formation of long positions, case in point Jaiprakash Associates, Bharat Heavy Electricals (BHEL).
Lot of banks where we have seen huge amount of short positions, which got accumulated and have bounced back mainly because of short covering, SBI is one of those stocks. Rs 2050-2100 would be a very strong resistance zone for SBI, so one can short around those levels. From the banking space if I talk then we were talking last week about how so many PSU banks, especially midcap PSU banks, have seen huge formation of short positions and fall in prices. Those positions got rolled over too. Now we are seeing that these PSU midcap names have bounced significantly from current levels mainly because of short covering.
Now, one of the stocks which we feel can significantly correct from current levels is Canara Bank. There we have seen unwinding of positions and stock prices in the last three-four trading sessions have significantly gone up from lower levels. What we believe is there is a Rs 13 dividend which is announced in this company so you are seeing around Rs 11.5 discount to future. Short at current levels, we are expecting probably 5-6 percent downside in this stock and also in other names like UCO Bank, Bank of India, Bank of Baroda. These would be the names which would underperform the market or take the market down, not so heavyweight, but SBI and other capital goods majors which I mentioned.
Q: What kind of position buildup are you seeing on Reliance Industries through yesterday?
A: Long positions built up, we have been very optimistic on this stock. Don't expect significant correction, keep buying at lower levels.