Indian market is acting stubborn unwilling to chase away the bears for a long time now. However, Vineet Bhatnagar, MD of MF Global feels that autos, metals and banks may lead in to a recovery.
Though there are concerns, he is expecting the May series to end at 5000 levels. "When 4720 or 4740 is made as a bottom there is a particular reading, the fact that it has bounced back in a very drudging manner over the last few days. It seems that 4900 still will get into an overbought situation by 4960 or 5020, that is where my trouble is," he said in an interview to CNBC-TV18.
Here is an edited transcript of his interview. Also watch the accompanying video.
Q: Do you think the May expiry will happen above 4800?
A: I think the optimum expiration price that we are looking at is indicating towards a 5000 kind of expiration. This is primarily because of the movement that we saw yesterday. We still have about five trading days to go, but this morning, it is looking as 5000.
Q: What are FIIs doing because the last couple of days it looked like they have been building fresh shorts on the Nifty futures?
A: Yes, while they are, I think it is not as alarming as far as the data analysis is concerned. Given the fact that the amount of contraction that we have seen in the index, it has been quite significant. If you look at the net sale either in the underlying cash market or even in the Nifty futures segment, as far as FIIs are concerned, it is not very alarming. Therefore, we turned our attention towards the OI build up on SGX. That is where I think some of the story starts getting revealed.
The OI build up of the Nifty futures on SGX is about 1.3 times or 30% higher than what is on NSE as an exchange. So, it is quite possible that any activity, whether it is a short hedge or a directional short position, seems to be getting taken on SGX at this point in time.
Q: Earlier when the GAAR confusion was playing out, a lot of people told us that arbitrage volumes have dipped and markets become quite shallow. Have things evened out since the clarifications came in?
A: There is some reprieve that people took in the fact that there was no immediate implementation of those provisions from this fiscal year. But the continued approach seems to be that while it has got pushed by a year and there could also be some more amendments that could generally speaking be more favourable, but the uncertainty around this entire discussion or matter seems to be making a more negative view around the book size itself. So, what we are seeing is a rollback or a reduction in the book size as far as FIIs customer base is concerned.
Q: Did you see any major position being taken in the oil companies in the futures market in the last 24 hours because of all the news flow?
A: It is quite contrary to what one would have expected to be the situation with OMCs. There was build up or positive movement that we saw as far as the OIs are concerned in ONGC and Cairn rather than the BPCL and HPCL.
Q: Any early signs you are getting about how the June series might pan out? Are there any early indications that June might be a better series because the last three series have not been very kind for the market?
A: In terms of way the Nifty slide could get halted or way the bottom could get built, perhaps the signs or not as alarming or as negative as one would have sensed in the first or second week of May. But having said that, one of the things that is still troubling me is the fact that the indicators that we track, an oversold or an overbought condition is indicated through, is making a rapid movement just by a very small corresponding movement in the Nifty price.
What I mean to say is that when 4720 or 4740 has made a bottom, there is a particular reading. The fact that it has bounced back in a very drudging manner over the last few days to make us see 4900 still means that it perhaps will get into an overbought situation by 4960 or 5020, that is where my trouble is.