After an encouraging April series, which saw the Nifty gaining close to 4 percent, Siddharth Bhamre, head-equity derivatives, Angel Broking believes the May series, which begins tomorrow, could see the NSE benchmark taking a shot at the 6000-mark.
"(In the May series), it is quite possible that market may go a bit higher than 5900, and change the consensus that it is losing the steam. We might probably touch 6,000 figure also and from there correction may happen," adds Bhamre in an interview to CNBC-TV18.
Below is the edited transcript of Bhamre’s interview to CNBC-TV18.
Q: It has been a very good series for us this time around but what is your expectation going into the following series? What are you expecting? Do you think 5900 will hold?
A: From today’s perspective, I feel a lot of people have bought 5900 Put option in the anticipation of a fall. We are seeing 80 percent rise in open interest. We believe stronger hands have sold those put options. It is quite possible in last half an hour, 45 minutes of the trading day one will see that the market may bounce back significantly and close at about 5900 or above.
What we are expecting in the next series, well, it is difficult to take a call on that. We are relying more on the liquidity parameters. Infact, last week I mentioned how before the last monetary policy the market had run-up and then after monetary policy the market corrected. The same could be seen, but the only positive part which we are seeing right now is foreign institutional investors (FII) buying in the cash market. Their short covering is more or less done in Index.
The day before, we saw fresh signs of formation of long position in index which is around Rs 900 crore of buy figure with a rise in open interest. This suggests that these guys are forming long positions. We do not believe that these long positions are formed only for one trading session. So, it maybe formed even in May series. At the same time, there is skepticism in market that it may not significantly go up.
If one sees the calls of May series, the maximum build-up that one can be seeing is a 5900 Call option. It is quite possible that market may go a bit higher than 5900, and change the consensus that it is losing the steam. We might probably touch 6,000 figure also and from there the correction may happen.
We were not expecting this significant bounce. We were not expecting beyond 5630-5650. Between 5650 and 5700 we have stopped out from our shorts but since then, we have not gone long in Nifty but in a lot of components of Nifty we have gone long- stock wise. It has been more of stock specific approach for us and that has been clearly visible in volumes. We have seen the stock futures volumes significantly go up in the last one week. I believe there is still some more headroom for this market but one has to be very careful of forming very aggressive long positions.
Q: IT has had a pretty rough series and we have the likes of Infosys which is down about 20 percent and even Tata Consultancy services (TCS) which has lost 9 percent. What sort of strategy or call would you possible take going into the May series? Would you see further downside within IT or would you take a possible converse long position?
A: From the data which we are observing in IT, Infosys on the day of its result saw huge short positions formation and after that also fresh formation of short positions were visible. However, interestingly their rollovers are low so the stock maybe volatile for the next half an hour or so. However, we do not see any respite.
The stock has further downside from current levels. Even Wipro has seen very low rollovers but this can be attributed to the change in contract after the de-merger from the other company and standalone IT company which it is right now. Hence low rollovers are present. A lot of people are contemplating that TCS is expensive and one should sell TCS but we are thinking a bit unlike. We do not have that view and the reason being, even if one is positive on market and one expects high beta to go up, lot of funds do have IT exposure at all given point of time.
At this point of time, people would like to have exposure in TCS and not in Infosys and Wipro. So, even if there is some formation of short positions, some minor supports have been breached or if it is looking fairly valuable at this point of time, if one wants exposure in IT space then the choice should be TCS. If one is not a fund house who is trading into market irrespective of these exposures in this sector, then I will completely avoid IT at this point in time. I will hold on to shorts in Infosys but don’t short TCS.