It may have been a disappointing close on Friday but all eyes are on the F&O expiry this week. Anu Jain, senior vice president of IIFL Private Wealth Management says the trading range is getting smaller and smaller.
Jain says, "If you have 5,336 as your 50 day moving average, it looks like once it crosses that, it’s only then shorts will really cut out or fresh longs will take place.”
Jain finds that the only sectors which seem to be performing are FMCG and pharma with autos being strong and banking holding out. She says trading would be limited on a positive bias to these four sectors. On the negative side, she suggests some cherry picking in infra probably because she feels closer to expiry some of the shorts may close out. “I think it’s an interesting week but it’s more stock specific,” says Jain.
Below is an edited transcript of her interview on CNBC-TV18. Watch the accompanying video for more.
Q: What kind of range do you see the Bank Nifty trading in? What targets do you have there?
A: Until the time it’s holding that 10,373 even though you are seeing some of the banks give up and some hold up, I have got a positive bias. So 5,400 is possible. Looking at the Bank Nifty, that’s what’s giving me confidence that probably the Bank Nifty will contribute to the Nifty and hold it up. The fact still remains that if it can hold on to these levels then it would probably make an attempt again on that 10,800 kind of levels and there is where you will approximately see the Nifty also converging back to 5,400.
If it can hold on that, that will be the major test because at 10,800 odd there is resistance. We saw that even on the 50 bps day which is what can really tell you whether it’s got strength to go up to about 11,200-11,400 or back to the 10,300 levels. If you look on the private side, you are seeing Kotak Mahindra Bank is still giving a fresh signal of a breakout, some of the other private banks have also done that, YES Bank is yet to perform but it’s also giving a similar signal.
I think it’s only State Bank of India, ICICI Bank and Axis Bank which need to give even a slight short covering move up which can help it. I am positive on the Bank Nifty and as long as it’s holding 10,370 odd, I would be with the positive bias. Maybe if I get 10,370, I would probably be buying rather than selling for at least a short time keeping a very close stop loss.
Q: IVRCL is something despite last week’s correction you are bullish on?
A: It has closed at Rs 61.65 and it has closed very marginally flat to positive on a day when rest of the midcaps and markets were giving up. It has got very good support at about Rs 60 which is also where its moving averages show a lot of support. Despite falling about 15% over the week, it’s still 19% up for the whole month. The trend is strong. We have seen stocks - when they move like this, they give an opportunity to get back into it. So closer to that Rs 60 level makes sense to enter the stock.
A pull back can take you up to about Rs 66-68 which would be an area where the trend would actually be tested again whether there is strength to move back above Rs 70 or not. So closer to Rs 60, with a stop loss around that range I would buy this stock. This is a high risk bet. Taking a look at the open interest, there was a drop in the short open interest which indicates that the shorts are getting out. So it makes a risky but good bet to play on the long side.
Q: Would you take a long or a short trade now within this narrow range or only once some of those levels that you spoke about get taken out on either side?
A: Yes, I would wait because it’s no point in getting in the middle of the zone. We have seen that intraday there are so many moves that you get stopped out either ways. It makes sense to come to a level and probably either buy on dips when its closer to those 5,245-5,250 kind of levels and it is showing that it’s not falling. If you see the market on the lower side, it shows you that I am not going to go down. So it will stay there and refuse to fall down. If it gives again that kind of a signal, you can probably go long. It being expiry week, the volatility will probably increase. So it’s better to wait rather than jump into a trade in anticipation.